Sepco Electric Power Construction Corporation vs. Gmr Kamalanga Energy Ltd.

2025 INSC 1171
REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. OF 2025
(ARISING OUT OF SLP (C) NO. 2706 OF 2024)

SEPCO ELECTRIC POWER
CONSTRUCTION CORPORATION

… APPELLANT

VERSUS

GMR KAMALANGA ENERGY LTD. …RESPONDENT


J U D G M E N T

AUGUSTINE GEORGE MASIH, J.

1. Leave granted.
2. The instant Civil Appeal, arising from Special
Leave Petition (Civil) No. 2706 of 2024, assails
the Judgment dated 27.09.2023 in ARBA (ICA)
No. 1 of 2023 (hereinafter, “Impugned
Judgment”) by Division Bench of the High Court
of Orissa (hereinafter, “High Court”), moved
under Section 37 of the Arbitration and
Conciliation Act, 1996 (hereinafter, “1996 Act”)
Signature Not Verified
Digitally signed by
JATINDER KAUR
Date: 2025.09.26
16:03:32 IST
Reason:
read with Section 13 of the Commercial Courts
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Act, 2015 by the sole Respondent herein, being,
GMR Kamalanga Energy Limited (hereinafter,
“GMRKE Limited”).
3. Vide the Impugned Judgment, the appeal was
allowed to the effect that Judgment dated
17.06.2022 in ARBP (ICA) No. 1 of 2021 as
passed by the Single Judge of the High Court
under Section 34 of the 1996 Act (hereinafter,
“Section 34 Judgment”) was set aside along with
the Award dated 07.09.2020 (as corrected on
17.11.2020) (hereinafter, “Arbitral Award”),
both of which were rendered in favour of the sole
Petitioner herein being SEPCO Electric Power
Construction Corporation (hereinafter,
“SEPCO”). This was done through framing of the
following issues by the Division Bench of the
High Court:
“A. Whether the Tribunal interpreted the
contractual provisions correctly in assessing
that issuance of contractual notices is a
condition precedent? If so, then can the
condition of issuance of notice be waived and
whether a party can claim estoppel
consequent thereto?
xxx xxx xxx

B. Whether the Tribunal based its analysis
and findings on mistaken facts?

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xxx xxx xxx

C. Whether the Tribunal’s interpretation of the
contractual provisions shocks the conscience
of the Court?
xxx xxx xxx

D. Whether the Ld. Single Judge was correct in
dismissing the Section 34 petition at the stage
of admission without considering all the
arguments made by the parties?
xxx xxx xxx

E. In light of the above whether the orders of
the Ld. Single Judge and the Ld. Arbitral
Tribunal have ‘shocked the conscience of this
Court’, or ‘are contrary to the basic notions of
justice’, or ‘are in express violation of Section
28(3) of the A&C Act’, which necessitates
interference by this Court under Section 37 of
the A&C Act?”

4. The factual matrix, as presented before us by
SEPCO is that it was an Engineering,
Procurement, and Construction (hereinafter,
“EPC”) Contractor which entered into numerous
agreements with GMRKE Limited with the
objective of construction of three 350 Mega Watt
coal-fired thermal power plants at the village of
Kamalanga in District Dhenkanal of state of
Odisha (hereinafter collectively, “Project” and
individually, “Unit 1”, “Unit 2” and “Unit 3”) on
behalf of the latter and its operations thereof.
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The details of the aforesaid agreements are as
follows:
a. Agreement for Civil Works and
Engineering, Erection, Testing and
Commissioning dated 28.08.2008, bearing
Contract No. GMR-SEPCO-03 (hereinafter,
“CWEETC Agreement”)
b. Guarantee and Co-ordination Agreement
dated 28.08.2008 (hereinafter, “GCA”)
c. Onshore Supply Agreement dated
28.08.2008, bearing Contract No. GMR-
SEPCO-02 (hereinafter, “Onshore Supply
Agreement”)
d. Offshore Supply Agreement dated
28.08.2008, bearing Contract No. GMR-
SEPCO-01 (hereinafter, “Offshore Supply
Agreement”)
(hereinafter collectively, “EPC Agreements”)
5. A fourth 350 Mega Watt equivalent plant
(hereinafter “Unit 4”) was proposed and also
included as part of the aforesaid agreements
through amendment(s) dated 31.05.2010,
amending the Milestone Dates and the prices of
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the contract in the EPC Agreements. However,
the work in relation to the said Unit 4 was
suspended by GMRKE Limited in August 2011.
6. Subsequently, owing to delays in the Project,
parties met at Jinan City, People’s Republic of
China. This led them to agree and execute the
Minutes of Meeting dated 07.11.2012
(hereinafter, “Jinan Agreement”).
7. As numerous disputes are said to have arisen
between the parties, SEPCO went on to
demobilize from the sites of construction of the
concerned Project midway, around January
2015. Following all the apparent disagreements,
SEPCO is said to have issued a Notice of Dispute
dated 30.03.2015 against GMRKE Limited. This
was followed by Notice of Arbitration dated
08.06.2015 by SEPCO leading to constitution of
an arbitral tribunal comprising three members
(hereinafter, “Arbitral Tribunal”).
8. The status of the aforesaid agreements, at the
time of beginning of the arbitration between the
parties was as follows:
a. CWEETC Agreement as amended by
Amendment No. 1 to the CWEETC
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Agreement dated 26.05.2009, Amendment
No. 2 to the CWEETC Agreement dated
31.05.2010, Amendment No. 3 to the
CWEETC Agreement dated 15.02.2011,
and Amendment No. 4 to the CWEETC
Agreement dated 04.04.2013 (hereinafter,
“Amended CWEETC Agreement”)
b. GCA as amended by Amendment No. 1 to
the GCA dated 31.05.2010 (hereinafter,
“Amended GCA”)
c. Onshore Supply Agreement as amended
by Amendment No. 1 to the Onshore
Supply Agreement dated 26.05.2009,
Amendment No. 2 to the Onshore Supply
Agreement dated 31.05.2010, and
Amendment No. 3 to the Onshore Supply
Agreement dated 15.02.2011 (hereinafter,
“Amended Onshore Supply Agreement”)
d. Offshore Supply Agreement as amended
by Amendment No. 1 to the Offshore
Supply Agreement dated 18.05.2009,
Amendment No. 2 to the Offshore Supply
Agreement dated 26.05.2009, and
Amendment No. 3 to the Offshore Supply
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Agreement dated 31.05.2010 (hereinafter,
“Amended Offshore Supply Agreement”)
(hereinafter collectively, “Amended EPC
Agreements”)

9. During the period between 27.04.2016 and
07.09.2020, pleadings and submissions were
pressed by the parties before the Arbitral
Tribunal leading to framing of 27 issues. SEPCO
presented before the Arbitral Tribunal that it
had achieved its Milestone Dates for Unit 1 on
09.05.2013, for Unit 2 on 18.11.2013, and for
Unit 3 on 03.06.2014 through completion of
Reliability Run Test, and GMRKE Limited took
control of the Units 1 and 2 on 23.11.2013,
which was contested by the latter.
10. One of the key contentions, as raised by SEPCO
before the Arbitral Tribunal, and which is also
germane to the dispute before us, was that there
was no condition precedent for contractual
notices to be sent by SEPCO to GMRKE Limited
under the Amended CWEETC Agreement for
want of explicit wording to said effect in the
concerned sections for procedural mandates,
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namely Sections 4.2.5 and 7.3.2. Despite
acknowledging no adducing of evidence by
SEPCO on compliance of notices, the Arbitral
Tribunal focused on the entitlement of waiver or
estoppel. It placed reference to the email dated
18.03.2012 inviting cooperation by GMRKE
Limited through Mr Rao for waiver of condition
of notices and the acceptance thereof by SEPCO
on 29.03.2012. Despite the contention of
GMRKE Limited on such an impossibility owing
to the “No Oral Modification” clause, equitable
estoppel was deemed to have arisen in March
2012.
11. Subsequently, the Arbitral Tribunal, vide its
Arbitral Award, determined the claims, as raised
by the parties, in an all-embracing manner,
being germane to delays, contractual
obligations, defects, and the resulting financial
entitlements under the Amended EPC
Agreements. As to their Jinan Agreement, while
SEPCO was held to have been granted extension
of time, there was no substitution of the original
dates of the milestones. Therein, with saving of
the financial entitlements of the parties, claims
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pre-dating the said agreement were observed to
have been settled. As to the considerations for
possession of land, its access and security
thereof, breaches were ascribed to GMRKE
Limited, including their failure to erect a
boundary wall within a reasonable timeframe,
as stipulated, and denial on their part to SEPCO
for non-exclusive access to the Project site.
While these lapses on the part of GMRKE
Limited were observed not to invariably
postpone the overall progress of the project, the
Arbitral Tribunal observed that disturbances
caused by the villagers in the area and
deficiencies vis-à-vis handing over the project
site caused delays which ought to be
compensated.
12. Referencing the technical obligations, GMRKE
Limited was held liable for their further failure
to provide SEPCO with coal and fuel oil, which
was compliant and in the requisite quantity.
This was observed to have caused quantifiable
delays in the Project. However, on the other
hand, the claim for additional sums, allegedly
owing to modifications made to the 400 kilovolt
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switchyard was rejected in favour of SEPCO,
remarking that there was no lodging of the
alleged claim of variation by SEPCO. While a
need for determination on claims arising from
“Change in Law” was rejected, the net effect of
determining all the claims in juxtaposition with
customs clearance by the Arbitral Tribunal was
that the obstruction(s) caused by GMRKE
Limited gave rise to a recovery in favour of
SEPCO. Even the suspension of Unit 4 for the
Project by GMRKE Limited, being beyond the
threshold of six months’ limit, was not legal as
per the Amended EPC Agreements, for which,
SEPCO was entitled to reimbursement.
13. On consideration of the counterclaims, the
Arbitral Tribunal went on to hold that SEPCO
was liable for delayed payment of liquidated
damages and defects caused on their end,
namely, attemperation flow, HFO system, fly
ash removal, and ash handling. Damages were
accordingly determined. Moreover, the bank
guarantees, as invoked by GMRKE Limited were
upheld, same being subject to restitution of
amounts which were observed to be retained
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improperly on their part.
14. Therefore, the determination of the Arbitral
Award gave a net effect that GMRKE Limited
was liable to pay approximately INR 995 Crores
to SEPCO.
15. The relevant portion of the Arbitral Award,
summarizing the final award, is reproduced
below:
“ XXXIV. AWARD
2338. For the reasons set forth above, the
Tribunal decides and awards as follows:
(1) Awards and orders GKEL to pay
SEPCO forthwith the amounts of –
a. USD 480,000, CNY
730,527,024 and INR 29,477,436 ;
and
b. USD 94,361,218.24 being the
sum drawn down under the bank
guarantees.
(2) Awards and orders SEPCO to pay
GKEL forthwith the amounts of CNY
262,707,471 and INR 2,339,989,308.
(3) Declare that GKEL is entitled to set off all
sums due and owing to it against any sum
that may be found otherwise due and owing
to SEPCO. ”

16. Assailing the Arbitral Award, GMRKE Limited
moved the Single Judge of the High Court under
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Section 34 of the 1996 Act raising the
contentions that the unfair treatment of the
parties and adjudicating the case dehors the
pleadings showcased procedural as well as legal
errors on behalf of the Arbitral Tribunal.
17. Elaborating, it contended that the CWEETC
Agreement stood modified by the Arbitral
Tribunal to the effect that the parties had
waived the need to issue contractual notices,
despite an express provision, being Section
25.5.3 of the Amended CWEETC Agreement,
establishing otherwise. Moreover, the Arbitral
Tribunal had erred in placing reliance upon
GMRKE Limited’s email dated 18.03.2012 to
observe the aforesaid and estopping them from
seeking contractual notices, notwithstanding
that the said email was merely to rescind the
Notice of Suspension dated 07.03.2012 by
SEPCO, that too only when GMRKE Limited had
established Letters of Credit of USD 12,660,000
(US Dollars 12 Million Six Hundred and Sixty
Thousand only) and USD 11,450,000 (US
Dollars 11 Million Four Hundred and Fifty
Thousand only).
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18. The preceding contentions are referred to
further contend that it is therefore that the
Arbitral Tribunal barred GMRKE Limited from
raising the defence vis-à-vis lack of contractual
notices on behalf of SEPCO in connection with
their claims, namely, Grid Synchronisation,
Fuel Oil, Coal, and Unit Characteristics Test-
Performance Guarantee Test. This led SEPCO
being awarded prolongation costs of roughly
INR 70 Crores to INR 80 Crores, therewith
reducing the liquidated damages, which would
have been owed towards GMRKE Limited by
SEPCO, to the tune of approximately INR 100
Crores.
19. Referring to the discriminating and unfair
treatment, GMRKE Limited pressed into service
the denial of their counterclaims to the tune of
at least INR 150 Crores by the Arbitral Tribunal,
observing want of notice on their part.
Cumulatively, it is asserted that the amount of
prejudice caused towards GMRKE Limited is in
the neighbourhood of INR 300 Crores.
20. Touching upon the decision of Arbitral Tribunal
being dehors the pleadings, it was emphasized
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on behalf of GMRKE Limited that SEPCO had,
at the outset, never asserted a waiver or
estoppel against GMRKE Limited apropos the
events, incidents, and/or communications of
March 2012. Rather, equivalent contention
raised by SEPCO with respect to those from
March 2010 was rejected by the Arbitral
Tribunal in paragraph 226 of the Arbitral
Award. Assailing the fabrication of its own
theory on estoppel, GMRKE Limited insisted
that it was not allowed to present any evidence
on the aforesaid issue.
21. Concluding, it alleged that such a conduct on
part of the Arbitral Tribunal is the
ultra vires
jurisdiction which it was vested with through
the contours of the Amended EPC Agreements
between the parties, and also Section 18 and
Section 34 Sub-Section 2 Clause (a) Sub-Clause
(iii) of the 1996 Act, wherefore calling for setting
aside of the Arbitral Award. To substantiate the
said claims, GMRKE Limited relied upon
decisions of this Court in Ssangyong
Engineering and Construction Company
Limited v. National Highways Authority of
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1
India (NHAI) , Associate Builders v. Delhi
2
Development Authority , and a 5-Judge
Bench decision of Supreme Court of United
Kingdom in Rock Advertising Limited v. MWB
3
Business Exchange Centres Limited
.
22. Rejecting the claims raised by GMRKE Limited,
the Singe Judge of High Court vide its Section
34 Judgment observed that within the scheme
of the 1996 Act, Section 12 Sub-Section 3, and
Section 13 provide for a mechanism in regard to
ability of the parties to challenge the partiality
of arbitrators. However, no such mechanism
was moved on behalf of GMRKE Limited
contemporaneously to the proceedings before
the Arbitral Tribunal. Allegations which are
raised in relation to Section 18 and Section 34
Sub-section 2 Clause (a) sub-clause (iii) of the
1996 Act are unsupported by any evidence and
therefore, mere allegations cannot be allowed to
establish bias and discrimination on the part of
the Arbitral Tribunal.

1
(2019) 15 SCC 131
2
(2015) 3 SCC 49
3
[2018] UKSC 24
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23. Referring to paragraph 191 of the Arbitral
Award, the Single Judge in its Section 34
Judgment highlighted that the Arbitral Tribunal
had acknowledged the contention by GMRKE
Limited that claims of SEPCO, as raised in the
said context, were untenable owing to the
absence of contractual notices as per the
Amended CWEETC Agreement. It is to settle the
said proposition, Single Judge observed, the
Arbitral Tribunal went on to determine whether
notice was a condition precedent as per the
terms therein in paragraphs 199 and 200 of the
Arbitral Award, and it was observed that while
numerous sections of the Amended CWEETC
Agreement, namely, Sections 4.3.5, 4.11.1.1,
4.11.2.1, and 4.11.3.1, explicitly established it
to be a condition precedent, different provisions
were invoked in the instant case.
24. It further acknowledged that the claim of
SEPCO vis-à-vis events, incidents, and/or
communications of March 2010 was rejected
owing to their failure to produce or deduce
evidence to the aforesaid contention. This
stands in contrast to apparent equitable
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estoppel arising through the email dated
18.03.2012 as sent by GMRKE Limited,
whereby the representative on their behalf
clarified that further contractual notices would
not be required, and the same was also affirmed
through the Jinan Agreement.
25. Further referencing Para 294 of the Arbitral
Award, it was observed by the Single Judge of
the High Court that the Arbitral Tribunal,
notwithstanding Section 25.5.3 of the Amended
CWEETC Agreement, which forbade oral
revisions in the terms without written consent
from both the parties, opined its reliance on the
equitable estoppel on facts and the submissions
raised on behalf of the parties before it. This was
despite a reference by GMRKE Limited on Rock
Advertising Limited (supra) to press into
service that an estoppel cannot override a
clause of “No Oral Modification” except for
unequivocal representation and reliance
thereof.
26. Sewing up the Section 34 Judgment in favour of
SEPCO, it also clarified that the judicial
interference is only permitted in cases where
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arbitral awards are shocking to the conscience
or which go against the most fundamental
principles of justice. Determining no violation of
Section 18 or Section 34 Sub-section 2 Clause
(b) Sub-Clause (ii) of the 1996 Act had been
proven as the Arbitral Tribunal had taken into
account the contractual clauses and relevant
facts before reaching its decision, the Single
Judge of the High Court, albeit debatably so,
held the Arbitral Award did not merit any
interference.
27. Aggrieved by the affirmation and upholding of
the Arbitral Award by the Single Judge of the
High Court vide its Judgment dated
17.06.2022, GMRKE Limited initially moved
this Court in Petition for Special Leave to Appeal
(Civil) No. 12194 of 2022, wherein, while the
operation of the Section 34 Judgment was
stayed vide Order dated 25.07.2022, on
15.05.2023, observing that GMRKE Limited has
undertaken to move the Division Bench of the
High Court under Section 37 of the 1996 Act,
seeking setting aside of the Arbitral Award as
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well as the Judgment dated 17.06.2022, this
Court disposed of the matter.
28. Thereafter, as GMRKE Limited moved the
Division Bench of the High Court vide ARBA
(ICA) No. 1 of 2023, the latter, while considering
the first issue raised before it, being, whether
the tribunal interpreted the contractual
provisions correctly in assessing that issuance
of contractual notices is a condition precedent?
If so, then can the condition of issuance of
notice be waived and whether a party can claim
estoppel consequent thereto?, determined it
through a two-fold path.
29. Firstly, it answered whether the condition of
issuance of contractual notices can be waived?
On this, reliance was placed on the Indian
Contract Act, 1872 (hereinafter, “ICA 1872”) for
analytical clarity, as it was postulated as per
Section 62 thereof that if the contracting parties
agree to substitute a new contract or, for that
matter, rescind or alter the original one, the
original contract no longer needs to be
performed. Emphasis has been laid on
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4
“agreement”, requiring consensus ad idem , as
well as a clear declaration of willingness to alter.
In its juxtaposition, Section 63 of the ICA 1872
codifies the English principle, according to
which, it allows the promisee to unilaterally
waive or remit performance, extend the term, or
accept an alternative satisfaction without regard
for consideration. It was also noted by the
Division Bench that this dispensation doctrine
has been limited through jurisprudence as
developed by the courts of India.
30. Elaborating on the aforementioned
jurisprudence of Section 63 of the ICA 1872, the
Division Bench of the High Court referred to
decision of this Court in Jagad Bandhu
5
Chatterjee v. Nilima Rani and Others ,
wherein this Court further referenced Waman
Shriniwas Kini v. Ratilal Bhagwandas and
6
Co. to affirm that a waiver under the mandate
of Section 63 of the ICA 1872 did not require any
consideration or even an agreement as it is

4
Agreement as to the same thing
5
(1969) 3 SCC 445
6
1959 SCC OnLine SC 120
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merely an intentional abandonment of the
right(s) of the promisee. Similarly, a waiver was
interpreted as consensual through decision of
this Court in P. Dasa Muni Reddy v. P. Appa
7
Rao
and therefore observed that it required
deliberate relinquishment with mutual
comprehension and cannot result from a
miscommunication or any involuntary
behaviour. This was then also reiterated by this
Court in All India Power Engineer Federation
and Others v. Sasan Power Limited and
8
Others through clarification that a waiver
requires deliberate and explicit intention to
relinquish a known right.
31. Regarding alteration under Section 62 of the ICA
1872, reference was drawn by the Division
Bench on decision of this Court in Chrisomar
Corporation v. MJR Steels Private Limited
9
and Another which had upheld the decision
of High Court of Calcutta in Juggilal
Kamlapat v. N.V. Internationale Crediet-En-

7
(1974) 2 SCC 725
8
(2017) 1 SCC 487
9
(2018) 16 SCC 117
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Handels Vereeninging ‘Rotterdam’ (alias
10
Rotterdam Trading Co. Ltd.) , to iterate that
an alteration made should go to the root of the
concerned contract and must displace its core
meaning, and in such an absence of creation of
an independent agreement, the original one
remains in effect.
32. Answering the question, reliance was placed on
11
MMTC Limited v. Vedanta Limited , and PSA
Sical Terminals Private Limited v. Board of
Trustees of V.O. Chidambranar Port Trust
12
Tuticorin and Others (authored by one of us,
being Justice B.R. Gavai, as he then was) to
observe that courts are prohibited from
rewriting contracts, so it is crucial to identify the
true intent of alteration or waiver when
interpreting commercial instruments. In these
cases, the arbitral mandate is limited to the
terms of the agreement.
33. Secondly, the Division Bench dealt with whether
the parties can claim estoppel in the given

10
1952 SCC OnLine Cal 250
11
(2019) 4 SCC 163
12
(2023) 15 SCC 781
Civil Appeal @ SLP (C) No.2706/2024 Page 22 of 106

circumstances. Herein, it was observed in the
Impugned Judgment that the legal maxim
13
allegans contraria non est audiendus , being
the foundation of the Doctrine of Estoppel,
forbids raising of contradicting claims by the
parties, especially when such a reliance results
in detriment. Taking support from the decision
of this Court in Pratima Chowdhury v.
14
Kalpana Mukherjee and Another , it clarified
that estoppel by conduct necessitates an
existing and unambiguous fact as legislated
through Section 115 of the erstwhile Indian
Evidence Act, 1872, and also fairness, and
exclusion of truth. Moreover, the decisions of
this Court in Provash Chandra Dalui and
Another v. Biswanath Banerjee and
15
Another and B.L. Sreedhar and Others v.
16
K.M. Munireddy (Dead) and Others had
explicitly distinguished estoppel from waiver,
with the latter being an intentional
relinquishment of one’s right.

13
A person who alleges contradictory facts is not to be heard
14
(2014) 4 SCC 196
15
1989 Supp (1) SCC 487
16
(2003) 2 SCC 355
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34. Therefore, ascertaining from the material on
record, it was observed to be established that
estoppel was barred by the parties through their
adherence and inclusion of “No Waiver” and “No
Oral Modification” clauses, making the contrary
view of the Arbitral Tribunal an untenable one.
35. Affirming the subsequent issue, being, whether
the tribunal based its analysis and findings on
mistaken facts, the Division Bench of the High
Court elaborated that the SEPCO had claimed a
breach of the CWEETC Agreement vis-à-vis
quality of coal, and the Arbitral Tribunal had
erroneously recorded the amended coal
moisture range in paragraph 606 of the Arbitral
Award as 9 to 12 percent rather than the correct
figures admittedly being 7 to 15 percent. Placing
reliance on this erroneous recording, the
Arbitral Tribunal, ruling against GMRKE
Limited, failed to acknowledge the moisture
levels actually being between 13.7 percent and
14.6 percent, as revealed by the analysis of the
expert in paragraph 649 of the Arbitral
Tribunal. Opining thereof, the Arbitral Tribunal
was observed to have distorted the liability and
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the computation of the liquidated damages, and
it also wrongly attributed the delays owing to
mill choking or bunker chuting to GMRKE
Limited.

36. Dealing with the third issue, as to whether the
tribunal’s interpretation of the contractual
provisions shocks the conscience of the court,
the Division Bench adopted a trinal approach.
37. The foremost contention to be ascertained was
that whether SEPCO was entitled to delay
related damages for prolongation and or
disruption costs, given the express terms of the
contract, was determined through reference to
Section 16.4 of the Amended CWEETC
Agreement, which postulates that termination
payments required documentation of
subcontractor settlement and actual costs.
SEPCO had claimed CNY 248,833,587 (Chinese
Yuan Two Hundred Forty Eight Million Eight
Hundred Thirty Three and Five Hundred Eighty
Seven) for undelivered equipment for Unit 4,
which was suspended. This claim, however, was
later updated using Billing Break-Up valuations
that were not backed by ledgers. Despite the
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objection raised by GMRKE Limited, the Arbitral
Tribunal only relied upon the audit conducted
by an assistant of one Mr Prudhoe, excluding
the disclosures. It was observed that despite no
evidence of payments to subcontractors and the
acclaimed settlement agreements being
hearsay, more than INR 200 Crores were
awarded. This was, the Division Bench of the
High Court observed, clearly a jurisdictional
error on part of the Arbitral Tribunal in
contravention to the principles laid down in the
decisions of this Court in Oil & Natural Gas
17
Corporation Ltd. v. Saw Pipes Ltd. , and
Associated Engineering Co. v. Government of
18
Andhra Pradesh and Another and decision
to this effect by High Court of Delhi in
Mecamidi S.A. v. Flovel MG Holdings Private
19
Limited and Another .
38. The ensuing contention was to ascertain that
the agreements excluded the common law right
of termination, such as acceptance of

17
(2003) 5 SCC 705
18
(1991) 4 SCC 93
19
2019 SCC OnLine Del 9414
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repudiatory breaches. Herein, the Division
Bench of the High Court elaborated that the
termination rights were “comprehensive and
exclusive” under Section 4.16 of the Amended
CWEETC Agreement. However, by ignoring
Section 16.3.1 and thereby revising the
agreement, the Arbitral Tribunal erroneously
observed in paragraphs 961 to 963 of the
Arbitral Award that common law termination
remedies survived. This is a direct
contravention of the explicit prohibition in the
Onshore Supply Agreements and the Amended
CWEETC Agreement. Moreover, the Arbitral
Tribunal, by recognizing SEPCO’s letters from
2014 and demobilization as an
acknowledgement of “repudiatory breaches” in
paragraphs 965 and 967 of the Arbitral Award,
granted a claim which was abandoned post-
hearing when SEPCO relied on termination by
Letter dated 31.03.2016.
39. Dealing with the tertiary consideration vis-à-vis
ascertaining that the SEPCO was liable to
receive 5 percent of the contractual price upon
completion of the tests, the Division Bench
Civil Appeal @ SLP (C) No.2706/2024 Page 27 of 106

observed that in accordance with Sections
6.1.5.1, 6.1.7.1(a) of the Amended CWEETC
Agreement, the Performance Guarantee Test
required the Reliability Run Test and the Unit
Characteristics Test. Nevertheless, the Arbitral
Tribunal granted INR 255 Crores, recognized
the Performance Guarantee Test as
“successfully completed”, even though it had
declared that the Unit Characteristics Test for
Unit 1 failed due to excessive attemperator flow,
inadequate Induced Draft fans, and loud noise.
The Arbitral Tribunal further disregarded
inconsistencies in Reliability Run Test protocols
demonstrating systematic failures, such as ash
management, Heavy Fuel Oil, and High-
Pressure feedwater systems, and design flaws
discovered in all units, with same being
recorded in paragraph 1094 of the Arbitral
Award. It was therefore held that the Arbitral
Tribunal travelled beyond its authority by
revising the milestone conditions and rewriting
the contract, being also in contrast to
observations in the aforesaid decisions in Saw
Pipes (supra) and Associated Engineering
Civil Appeal @ SLP (C) No.2706/2024 Page 28 of 106

(supra) , calling for setting aside of the Arbitral
Award.
40. Moving on to the fourth issue, the Division
Bench was to ascertain whether the Single
Judge was correct in dismissing the Section 34
petition at the stage of admission without
considering all the arguments made by the
parties. On this, it articulated that the Single
Judge of the High Court, while dealing with the
contentions of the parties at the stage of
admission, formulated issues on creation of an
un-pleaded case by the Arbitral Tribunal, on
rewriting of the contracts through waiver of
notices, and whether the waiver so inculcated
applied bilaterally amongst the parties.
Commenting on the decision of the Single
Judge, the Division Bench remarked that
despite admitting that the decision of the
Arbitral Tribunal on waiver was based on scant
or no evidence, it was still affirmed by wrongly
placing reliance on Mr Rao’s email dated
18.03.2012, and further observed that the
Arbitral Award did not “shock the conscience” in
accordance with Associate Builders (supra) ,
Civil Appeal @ SLP (C) No.2706/2024 Page 29 of 106

thereby refusing to interfere under Section 34 of
the 1996 Act. It was therefore alleged by GMRKE
Limited that this alleged error of waiver of notice
had struck at the root of the issue of
prolongation costs arising from suspension of
the Unit 4. The Division Bench further observed
that Section 12 Sub-Section 3 read with Section
13 of the 1996 Act mandated a prompt
challenge on alleged bias by the Arbitral
Tribunal within 15 days. Accordingly, citing the
20
decision of House of Lords in Porter v. Magill
and of this Court in N.K. Bajpai v. Union of
21
India and Another , both the forums rightly
ruled that belated claims of bias were
unsustainable.
41. Fifthly, the Division Bench of the High Court
determined that in light of the above, whether
the orders of the Single Judge and the Arbitral
Tribunal have “shocked the conscience of this
Court”, or “are contrary to the basic notions of
justice”, or “are in express violation of Section
28(3) of the A&C Act”, which necessitates

20
[2002] 2 AC 357 : [2001] UKHL 67
21
(2012) 4 SCC 653
Civil Appeal @ SLP (C) No.2706/2024 Page 30 of 106

interference under Section 37 of the 1996 Act.
Hereby, the High Court observed that the
interpretation by Arbitral Tribunal of the terms
of the contract in the instant case, specifically
with regard to SEPCO’s right to delay related
damages for costs associated with prolongation
and disruption, and Arbitral Tribunal’s
conclusion that the said agreements did not
include the common law right of termination,
constitutes a flagrant breach of the contract(s)
between the parties.
42. Observing that the Arbitral Tribunal shocked
the conscience of the court by exceeding its
jurisdiction and also changing the terms of the
contract through a total disregard of the specific
terms, it further reiterated that any award that
disregards the binding precedents as laid down
through numerous decisions of this Court can
be set aside on grounds of violating
fundamental policy of Indian law. In a similar
vein, unequal treatment of the parties by the
Arbitral Tribunal amounts to violation of
natural justice under Section 18 of the 1996
Act. The Division Bench, on this basis, observed
Civil Appeal @ SLP (C) No.2706/2024 Page 31 of 106

that the Arbitral Tribunal dismissed the
counterclaims of GMRKE Limited for alleged
lack of notice, even though it had observed that
the parties had waived contractual notifications.
Collectively, the Bench further remarked that it
goes against the fundamental ideas of justice to
reword the clauses of “No Oral Modification” and
“No Waiver”. Therefore, placing reliance on the
decisions of this Court in Larsen Air
Conditioning and Refrigeration Company v.
22
Union of India and Others and a 3-Judge
Bench decision in Project Director, National
Highways No.45 E and 220 National
Highways Authority of India v. M. Hakeem
23
and Another , (where one of us, Justice B.R.
Gavai, as he then was, was a member) the
Arbitral Award was set aside.
43. It is, therefore, in this mode that the Division
Bench of the High Court allowed the appeal
moved by GMRKE Limited through ARBA (ICA)
No. 1 of 2023 and consequently set aside the
Section 34 Judgment and the Arbitral Award.

22
2023 INSC 708 : (2023) 15 SCC 472
23
(2021) 9 SCC 1
Civil Appeal @ SLP (C) No.2706/2024 Page 32 of 106

44. Assailing the Impugned Judgment, SEPCO
moved this Court through filing of Petition for
Special Leave to Appeal (Civil) No. 2706 of 2024
and raised seven propositions.

45. Learned Senior Advocate on behalf of SEPCO,
while contending of the scope for interference
under Section 34 of the 1996 Act, placed
reliance on decision by a 3-Judge Bench of this
Court in Renusagar Power Co. Ltd. v. General
24
Electric Co. to assert that a mistake of fact or
law by the arbitrator, for that purpose, does not
call for an interference of the courts to set aside
such an award and moreover, a mere
contravention of law does not attract the bar of
public policy. Further supporting the
applicability of the Renusagar (supra) on India
seated arbitral awards, reliance was placed on
Saw Pipes (supra) .
46. Referencing another 3-Judge Bench decision of
this Court in Oil and Natural Gas
Corporation Limited v. Western Geco
25
International Limited , which was

24
1993 Supp 3 SCR 22 : 1994 Supp (1) SCC 644
25
(2014) 9 SCC 263
Civil Appeal @ SLP (C) No.2706/2024 Page 33 of 106

th
pronounced before the 246 Law Commission
Report could be given effect to, it was asserted
that an award would be adjudicated to be
contrary to the “fundamental policy of Indian
law” if there’s a violation of doctrine of audi
26
alteram partem , judicial approach has not
been followed by the arbitrator, or the award
falls outside the scope of doctrine of
Wednesbury Reasonableness in terms of its
perversity.
47. Equivalent reliance has been placed on
decisions of this Court in Associate Builders
(supra) , HRD Corporation (Marcus Oil and
27
Chemical Division) v. GAIL (India) Limited ,
Ssangyong Engineering (supra) , and Gemini
Bay Transcription Private Limited v.
Integrated Sales Service Limited and
28
Another (Justice B.R. Gavai, as he then was,
was also a member of the Bench) to argue that
the instant Arbitral Award ought not to have

26
Hear the other side.

27
(2018) 12 SCC 471
28
(2022) 1 SCC 753
Civil Appeal @ SLP (C) No.2706/2024 Page 34 of 106

been interfered with by the Division Bench of
the High Court.
48. Bringing the decision of this Court in a recent
3-Judge Bench decision in Delhi Metro Rail
Corporation Limited v. Delhi Airport Metro
29
Express Private Limited to our attention,
wherein one of us (Justice B.R. Gavai, as he
then was) was also a member, it was asserted
that interference with an arbitral award cannot
frustrate the “commercial wisdom behind opting
for alternate dispute resolution”, merely
because an alternative view exists.
49. Secondly, a two-fold proposition was raised on
behalf of SEPCO. At the foremost,
substantiating its assertion that the grounds
not urged before a lower court cannot be raised
before a superior court, for which reliance was
placed on a 5-Judge Bench decision of this
Court in Daman Singh and Others v. State of
30
Punjab and Others . It further pressed into
service that it is not unheard of that a court does
not pass findings on every issue raised in the

29
(2024) 6 SCC 357
30
(1985) 3 SCR 580 : (1985) 2 SCC 670
Civil Appeal @ SLP (C) No.2706/2024 Page 35 of 106

petition or concerned written submission(s). An
appellate court ought not to concern itself as to
why a contention is not dealt as part of the
judgment or order. To aid its secondary
assertion that at the stage of admission, the
matter can be heard at length, including on
merits, and the appeal can be dismissed if the
court finds it devoid of merit or otherwise not
maintainable, reliance was placed on Bolin
31
Chetia v. Jogadish Bhuyan and Others , the
relevant paragraph of which, being 14, reads as
follows:

31
(2005) 6 SCC 81
Civil Appeal @ SLP (C) No.2706/2024 Page 36 of 106

appears to us as inherent. Matters are
placed for admission with a view to enable
the Court to apply its mind to controversy
and to find out whether the order
questioned calls for reconsideration by the
higher court. This is usually done by giving
hearing to the party-appellant. It is implicit
that at that stage the Court may adjudicate
by finding against the petitioning appellant
and upholding the order impugned. Such
adjudication at the stage of admission of
appeal is part of the jurisdiction of the
appellate court and we have doubt whether
that jurisdiction could be affected if it is
explicitly granted by the statute by framing
a rule of procedure. Placing the matters for
admission before the Court are not mere
matters of procedure but also involve
exercise of judicial authority by the
appellate court. Normally if the authority is
conferred by the statute, we would be loath
to hold that its effectiveness would stand
curtailed by any procedural rule disabling
the Court, of its power of hearing the appeal
and pronouncing at the stage of admission
about the merits of the appeal by finding out
whether the same deserves further
consideration by the Court.
All this process involved in ‘admission’ has
clear juridical efficacy and recognition. It
subserves the dynamics to have a speedy
and sure disposal of matters brought before
the higher forums in the judicial hierarchy.
The Code of Civil Procedure permits
expressly the rejection of appeals at
admission stage by enacting provision like
Order 41 Rule 11 CPC. Even without such a
provision, we would think that it would be
inbuilt (sic) (inbred) in the appellate
jurisdiction enabling the Court to hear the
appellant as to the matter brought before it
Civil Appeal @ SLP (C) No.2706/2024 Page 37 of 106

and reject the appeal which may prima facie
have no merit or may suffer from the defects
of untenability, limitation as well of
incompetency. This stage, which is treated
as admission stage of an appeal, appears
to protect the litigation from waste of costs
as well of public and private time. That can
effectively check meritless and vexatious
litigations. All these considerations must be
kept in view while considering the form of
appeal provided by statute. Provisions of
Section 483 and the appeal thereunder
cannot be treated as an exception and as
erasing out all these juridical as well as
judicious considerations inherent in the
admission stage of an appeal. We can well
observe that the stage of admission of
appeals in company matters is neither
superfluous nor unnecessary. In fact that
posits serious exercise of appellate
authority full of judicial consequences.
Unless there is something expressly
dispensing with that stage, it would be
neither just nor proper to hold that in the
appeals under Section 483 there cannot be
a hearing at the admission stage. We have
already indicated that what was observed
in Golcha case [(1970) 3 SCC 65 : AIR 1970
SC 1350] was with reference to the rule of
this Court and nothing more. That
observation cannot further be strained or
logically extended as laying down that in an
appeal under Section 483 of the Act the
appellate court is powerless at the stage of
admission to find out the merit of the appeal
or is disabled from rejecting it though it may
be worthless. It is well settled that possible
logical extensions from the ratio of a
judgment surely are not part of the ratio
itself and it is hazardous to apply
precedents in that manner.’
Civil Appeal @ SLP (C) No.2706/2024 Page 38 of 106

50. Thirdly, asserting on the scope of interference
under the Section 37 of 1996 Act, it is
contended that the scope under this section is
narrower than that of Section 34 of the 1996 Act
and the court while exercising its power under
Section 37 of the 1996 Act, must only ascertain
that the court under Section 34 of the 1996 Act
did not exceed its jurisdiction, citing decisions
of this Court in MMTC Limited (supra) ,
Reliance Infrastructure Limited v. State of
32
Goa , and a 3-Judge Bench decision in UHL
Power Company Limited v. State of
33
Himachal Pradesh .
51. Furthermore, on its proposition that estoppel is
an exception, rather a safeguard, to the “No Oral
Modification” clause(s), learned Senior Advocate
sought support from the majority opinion of 5-
Judge Bench decision of the Supreme Court of
United Kingdom in Rock Advertising Limited
(Supra) , and a unanimous decision of 5-Judge

32
(2024) 1 SCC 479
33
(2022) 4 SCC 116
Civil Appeal @ SLP (C) No.2706/2024 Page 39 of 106

Bench of Court of Appeal of Singapore in
Charles Lim Teng Siang & Anr v. Hong
34
Choon Hau & Anr to press in service that law
safeguards a situation wherein the parties
seeking to not rely on a no oral modification
clause may do so through conduct and also,
across the schools of thought vis-à-vis legal
effect of the no oral modification clause, all three
recognize the doctrine of equitable estoppel as
an exception. A reference was also made to
decision of the High Court of Bombay in John
Distilleries Pvt. Limited v. Brihan
35
Maharashtra Sugar Syndicate Limited
wherein an oral alteration to the bottling
charges were upheld and it was observed that
validity of such clauses, being outside the scope
of jurisdiction under Section 34 of the 1996 Act,
is immaterial.
52. To assert that rule of hearsay is not applicable
on expert witnesses, the learned Senior
Advocate cited the decision by a 3-Judge Bench
of Court of Appeal (Criminal Division) of

34
[2021] SGCA 43
35
2019 SCC OnLine Bom 67
Civil Appeal @ SLP (C) No.2706/2024 Page 40 of 106

36
England and Wales in R. v. Abadom and by
Single Judge of the Chancery Division of the
High Court of United Kingdom in English
37
Exporters Pty. Ltd. v. Eldonwall to contend
that reliance can be placed on work of others
who are engaged in the same field. It is further
asserted that as per English law, the damages
can be awarded based on guesswork, and courts
ought to reasonably assess the damages as far
as possible whereby precise calculation is
impossible. Reference in this regard was made
to decision of King’s Bench in Chaplin v.
38
Hicks and a decision of Court of Appeal (Civil
Division) of England and Wales in Soteria
Insurance Limited v. IBM United Kingdom
39
Limited . Decision of this Court in
Construction and Design Services v. Delhi
40
Development Authority was also brought to
our attention to assert that a court can proceed
on guesswork as to the quantum of

36
[1983] 1 WLR 126
37
[1973] 1 Ch 415
38
[1911] 2 KB 786
39
[2022] EWCA Civ 440
40
(2015) 14 SCC 263
Civil Appeal @ SLP (C) No.2706/2024 Page 41 of 106

compensation to be allowed.
53. Lastly, it is contended on behalf of SEPCO that
a termination clause would not exclude a party’s
right under common law to terminate on
account of a repudiatory breach through
th
reference to Page 552 of the 30 edition of
Anson’s Law of Contract, which postulates:
“A contract may contain a clause setting out
the circumstances and conditions upon which
one party shall have the right to terminate by
reason of the other party's breach. Such a
clause may make clear that a particular term
is a condition of the contract so that the rules
of termination for breach of condition,
discussed above, will then apply. [ Union Eagle
Ltd. vs. Golden Achievement Ltd.; [1997] AC
514] But the clause may be drafted more
generally to provide a remedial regime
(including the right for the innocent party to
terminate the contract) for breach of contract in
specified circumstances [Lombard North
CEntral ple v. Butterworth; [1987] QB 527],
and it may refer to a standard of breach which
is different from that which gives rise to the
right to terminate at common law––such as
where the breach is ‘material’, which has been
held to cover breaches which are less than
‘fundamental’, but where it is more than trivial
or minimal.[Dalkia Utilities Services Plc v
Celtech International Ltd; EWHC 63 (Comm)]
The party seeking to rely on such a clause
must establish strictly that the clause entitles
it to terminate in relation to the breach which
has occurred [Rice v. Great Yarmouth Borough
Council; (2001) 3 L.G.L.R. 4 (CA)], and the
Courts will not hold that the common law right
Civil Appeal @ SLP (C) No.2706/2024 Page 42 of 106

to terminate for repudiatory breach has been
excluded by an express termination clause
without clear words showing such an
intention. [Dalkia Utilities Services Plc v
Celtech International Ltd; EWHC 63 (Comm)]
Moreover, the exercise of the right to terminate
under an express termination clause will not
normally constitute affirmation of the contract
so a s to deprive the innocent party of the right
to claim its remedies for breach at common
law, at least where the clause provides a right
to terminate at common law which
corresponds to a right under the general law
(eg because the breach goes to the root of the
contract). [ Stocznia Gdynia SA v Gearbulk
Holdings Ltd; [2009] EWCA Civ 75]”


54. Moreover, it was pressed that a termination
clause does not apply in situations where a right
to termination is identified in common law, as
iterated by decision of Queen’s Bench in
Vinergy International (Pvt.) Ltd. v. Richmond
41
Mercantile Limited FZC and as also
observed by the Arbitral Tribunal in paragraph
962 of the Arbitral Award through reliance on
decision of House of Lords in Gilbert-Ash
(Northern) Limited v. Modern Engineering
42
(Bristol) Limited it is asserted that one starts
with the presumption that neither party intends

41
[2016] EWHC 525 (Comm)
42
[1974] AC 689
Civil Appeal @ SLP (C) No.2706/2024 Page 43 of 106

to abandon any remedies for its breach arising
by operation of law, and clear express words
must be used in order to rebut such a
presumption.

55. On the other hand, opposing the aforesaid
contentions, learned Senior Advocate on behalf
of GMRKE Limited has extensively reiterated its
successful claims before the Division Bench of
the High Court and brought to our attention
numerous aforementioned case laws and the
materials on record to showcase and validate its
claims. Therefore, the same are not being
reiterated for having been laid down by us while
referencing the Section 34 Judgment.
56. We have heard the submissions raised on behalf
of the parties at length and also, through their
assistance, perused the material on record
which has been analytically brought to our
attention.
57. Before we delve into the determination of the
issues raised before this Court by the parties, it
is apposite to refer to the jurisprudence of
Section 34 and 37 of the 1996 Act. The verbatim
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text of the provisions of Section 34 of the 1996
Act posits the wisdom of the legislature hence:
“34. Application for setting aside arbitral
award. —
(1) Recourse to a Court against an arbitral
award may be made only by an
application for setting aside such award
in accordance with sub-section (2) and
sub-section (3).
(2) An arbitral award may be set aside by
the Court only if—
(a) the party making the application
furnishes proof that—
(i) a party was under some
incapacity, or
(ii) the arbitration agreement is not
valid under the law to which the
parties have subjected it or,
failing any indication thereon,
under the law for the time being
in force; or
(iii) the party making the application
was not given proper notice of
the appointment of an arbitrator
or of the arbitral proceedings or
was otherwise unable to present
his case; or
(iv) the arbitral award deals with a
dispute not contemplated by or
not falling within the terms of the
submission to arbitration, or it
contains decisions on matters
beyond the scope of the
submission to arbitration:
Provided that, if the decisions on
matters submitted to arbitration
can be separated from those not
so submitted, only that part of
the arbitral award which
contains decisions on matters
Civil Appeal @ SLP (C) No.2706/2024 Page 45 of 106

not submitted to arbitration may
be set aside; or
(v) the composition of the arbitral
tribunal or the arbitral procedure
was not in accordance with the
agreement of the parties, unless
such agreement was in conflict
with a provision of this Part from
which the parties cannot
derogate, or, failing such
agreement, was not in
accordance with this Part; or
(b) the Court finds that—
(i) the subject-matter of the dispute
is not capable of settlement by
arbitration under the law for the
time being in force, or
(ii) the arbitral award is in conflict
with the public policy of India.
Explanation 1.—For the avoidance of any
doubt, it is clarified that an award is in conflict
with the public policy of India, only if,—
(i) the making of the award was induced
or affected by fraud or corruption or was
in violation of section 75 or section 81;
or
(ii) it is in contravention with the
fundamental policy of Indian law; or
(iii) it is in conflict with the most basic
notions of morality or justice.
Explanation 2.—For the avoidance of doubt,
the test as to whether there is a contravention
with the fundamental policy of Indian law
shall not entail a review on the merits of the
dispute.
(2A) An arbitral award arising out of
arbitrations other than international
commercial arbitrations, may also be set aside
by the Court, if the Court finds that the award
is vitiated by patent illegality appearing on the
face of the award:
Civil Appeal @ SLP (C) No.2706/2024 Page 46 of 106

Provided that an award shall not be set aside
merely on the ground of an erroneous
application of the law or by reappreciation of
evidence.
(3) An application for setting aside may not be
made after three months have elapsed from
the date on which the party making that
application had received the arbitral award or,
if a request had been made under section 33,
from the date on which that request had been
disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the
applicant was prevented by sufficient cause
from making the application within the said
period of three months it may entertain the
application within a further period of thirty
days, but not thereafter.
(4) On receipt of an application under sub-
section (1), the Court may, where it is
appropriate and it is so requested by a party,
adjourn the proceedings for a period of time
determined by it in order to give the arbitral
tribunal an opportunity to resume the arbitral
proceedings or to take such other action as in
the opinion of arbitral tribunal will eliminate
the grounds for setting aside the arbitral
award.
(5) An application under this section shall be
filed by a party only after issuing a prior notice
to the other party and such application shall
be accompanied by an affidavit by the
applicant endorsing compliance with the said
requirement.
(6) An application under this section shall be
disposed of expeditiously, and in any event,
within a period of one year from the date on
which the notice referred to in sub-section (5)
is served upon the other party.”
Civil Appeal @ SLP (C) No.2706/2024 Page 47 of 106

58. Modelled on Article 34 of the UNCITRAL Model
Law on International Commercial Arbitration,
1985, Section 34 of the 1996 Act provides for a
recourse to a court against an arbitral award
and thereby allows for moving of an application
for setting aside arbitral awards. Numerous
authors have reiterated that the 1996 Act only
allows for a limited judicial intervention, only to
protect against procedural errors, violations of
natural justice abuse of jurisdiction, or to
interfere with awards that are in contravention
of the public policy of India. Since arbitration
aims to avoid additional litigation at the stage of
enforcement in order to provide for finality of
proceedings, courts, ideally, lack the authority
to reevaluate the substantive arguments on the
merits of an award.
59. Evidently, the challenge to an arbitral award is
embodied in Section 34 and appellate
consideration thereof is provided under Section
37 Sub-Section 2 Clause (a) of the 1996 Act
thereof. An annulment of award through
exercising of jurisdiction under Section 34
renders the said award null and void, making it
Civil Appeal @ SLP (C) No.2706/2024 Page 48 of 106

unenforceable locally under Section 36 of the
1996 Act, and even internationally under the
UNICITRAL Model Law and the New York
Convention.

60. Numerous decisions of this Court have
crystallized the scope of limited interference.
Unquestionably, it is always a conscious
decision by the parties entering the expeditious
mode of dispute resolution in form of arbitration
to oust or to minimize the involvement of courts
as also observed by this Court in McDermott
International Inc. v. Burn Standard Co. Ltd.
43
and Others . Further, it was in decision of this
Court in Associate Builders (supra) , wherein
the coordinate Bench, while dealing with ground
of an award being in conflict with “public policy”
under Section 34 of the 1996 Act, opined that
during the said recourse merits of an award are
not to be examined or re-visited, and such an
inquiry is only permitted to certain specified
circumstances. Therein, apropos the perversity
of an award, mandating an interference,

43
(2006) 11 SCC 181
Civil Appeal @ SLP (C) No.2706/2024 Page 49 of 106

support was sought from decisions of this Court
in H.B. Gandhi, Excise and Taxation Officer-
cum-Assessing Authority, Karnal and Others
44
v. M/s Gopi Nath & Sons and Others and
Kuldeep Singh v. Commissioner of Police
45
and Others to recapitulate the working test of
perversity.
61. Extensive reference to the aforesaid decision
was made recently by this Court in Parsa Kente
Collieries Limited v. Rajasthan Rajya Vidyut
46
Utpadan Nigam Limited to caution against
interference with the arbitral awards in a such
a manner which maybe deemed as casual or
cavalier. Rather, an interference is mandated in
a situation wherein any perversity so-identified
in the arbitral award goes to the root of the
matter and there is no alternative interpretation
to allow such an arbitral award to sustain in the
eyes of law. While observing to the aforesaid
effect, a 3-Judge Bench of this Court in Dyna
Technologies Private Limited v. Crompton

44
1992 Supp (2) SCC 312
45
(1999) 2 SCC 10
46
(2019) 7 SCC 236
Civil Appeal @ SLP (C) No.2706/2024 Page 50 of 106

47
Greaves Limited also spelt out that an
interference should not be done merely because
an alternative view on facts and interpretation
of contract exists.
M. Hakeem (supra)
62. In , this Court observed that
when courts exercise their powers under
Section 34 of the 1996 Act, they have a limited
ability to set aside an award, as and when any
of the grounds laid down by the statute under
Section 34 are triggered or fulfilled. It also
clarified such a power does not include the
power of the courts to modify an arbitral award.
The Division Bench therein observed as follows:
“ 16. What is important to note is that, far from
Section 34 being in the nature of an appellate
provision, it provides only for setting aside
awards on very limited grounds, such grounds
being contained in sub-sections (2) and (3) of
Section 34. Secondly, as the marginal note of
Section 34 indicates, ‘recourse’ to a court
against an arbitral award may be
made only by an application for setting
aside such award in accordance with sub-
sections (2) and (3). ‘Recourse’ is defined by P.
Ramanatha Aiyar's Advanced Law Lexicon
(3rd Edn.) as the enforcement or method of
enforcing a right. Where the right is itself
truncated, enforcement of such truncated right
can also be only limited in nature. What is
clear from a reading of the said provisions is

47
(2019) 20 SCC 1
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that, given the limited grounds of challenge
under sub-sections (2) and (3), an application
can only be made to set aside an award. This
becomes even clearer when we see sub-
section (4) under which, on receipt of an
application under sub-section (1) of Section 34,
the court may adjourn the Section 34
proceedings and give the Arbitral Tribunal an
opportunity to resume the arbitral proceedings
or take such action as will eliminate the
grounds for setting aside the arbitral award.
Here again, it is important to note that it is the
opinion of the Arbitral Tribunal which counts
in order to eliminate the grounds for setting
aside the award, which may be indicated by
the court hearing the Section 34 application.
xxx xxx xxx
48. Quite obviously if one were to include
the power to modify an award in Section 34,
one would be crossing the Lakshman Rekha
and doing what, according to the justice of
a case, ought to be done. In interpreting a
statutory provision, a Judge must put
himself in the shoes of Parliament and then
ask whether Parliament intended this
result. Parliament very clearly intended that
no power of modification of an award exists
in Section 34 of the Arbitration Act, 1996. It
is only for Parliament to amend the
aforesaid provision in the light of the
experience of the courts in the working of
the Arbitration Act, 1996, and bring it in line
with other legislations the world over .”


63. It is pertinent to note that this decision in M.
Hakeem (supra) to the effect that courts do not
have any power to modify an arbitral award, was
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opined to be correct in law, albeit by a minority
opinion in a recent 5-Judge Bench decision of
this Court in Gayatri Balasamy v. ISG
48
Novasoft Technologies Limited with the
exception that the courts indeed have the power
to carry out corrections in computational,
clerical or typographical errors, and any other
errors of similar nature, owing to the principle
49
of actus curiae neminem gravabit . However,
the majority opinion, authored by Chief Justice
Sanjiv Khanna (as he then was) on his behalf
and three others (including both of us), therein
observed that the authority to modify an arbitral
award is restricted and should only be used in
case of well-defined, precise conditions while
establishing standards for the use of a court
modifying such an award and clarifying import
facets thereof.
64. Firstly, the Court upheld the power of a court as
granted by Section 34 Sub-Section 2 Clause (a)
Sub-Clause (iv) of the 1996 Act to sever the
“invalid” sections of an award from the “valid”

48
(2025) 7 SCC 1
49
An act of the Court shall prejudice no man
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50
ones. The concept of kompetenz-kompetenz is
consistent with the aforesaid idea as iterated
and discussed in Part II of the decision. While
discussing the concept of power of a court to
sever an award, it clarified that it is not always
available, particularly in situations wherein the
legitimate and the invalid portions of an award
are inextricably intertwined, rendering partial
annulment infeasible in such situations.
65. Secondly, holding that a court has power to
correct clerical, computational, or typographical
errors that appear manifest on the face of the
record in Part IV and V of the decision, it
elucidated that such authority of a court ought
not to be mistaken for a review of the award on
merits. Such modifications are permissible
within the strict parameters of judicial oversight
under Section 34 of the 1996 Act, wherein the
court only corrects inadvertent errors as
opposed to conducting a substantial re-
evaluation of the decision of an arbitrator,
thereby reiterating the decisions of this Court in

50
Power to decide on its own jurisdiction
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the likes of Grindlays Bank Ltd. v. Central
Government Industrial Tribunal and
51
Others which upheld procedural corrections
undertaken by a court to an arbitral award.

66. Thirdly, on the post-award interest aspect, as
discussed in Part IX of the decision, it held that
in certain circumstances, a court indeed has the
authority to modify the interest awarded in an
arbitral award. It highlighted that although
Section 31 Sub-Section 7 Clause (b) of the 1996
Act establishes a standard rate of post-award
interest, situations to the following effect may
arise. On that, it illustrates, a court may raise
the interest to achieve justice if one party is at
fault to pay the award on time. In order to
prevent more rounds of litigation, it elaborates
that such power extends beyond that to simply
lowering the interest rate. This guarantees that
the award is carried out promptly and fairly and
to avoid drawn-out arguments over interest
rates.
67. Finally, iterating on the power of the Court

51
1980 Supp SCC 420
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under Article 142 of the Constitution of India
under Part XII, it affirmed that as per the
fundamental tenets of the 1996 Act, this
enormous power must be used carefully and
sparingly, as observed recently by a 5-Judge
Bench of this Court in Shilpa Sailesh v. Varun
52
Sreenivasan while discussing the said
jurisprudence. This Court, while exercising
power under Article 142, ought to ensure a
dispute is settled amicably, especially in
situations where stringent procedural norms
could lead to an unfair outcome, but does not
empower for re-evaluation of an award on merits.
68. Furthermore, in the process of discussing the
jurisdiction and powers of courts under Section
34 and 37 of the 1996 Act, a 3-Judge Bench of
this Court, in UHL Power Company Limited
(supra) while holding that the learned Single
Judge of the concerned High Court had
exceeded his jurisdiction through interference
with the arbitral award, explicated the reasons
of such narrow scope of powers of a court under

52
(2023) 14 SCC 231
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Section 34 of the 1996 Act. Referencing
extensively on other decisions of this Court,
namely, MMTC Limited (supra) , K. Sugumar
and Another v. Hindustan Petroleum
53
Corporation Limited and Another Dyna
,
Technologies (supra) , and Parsa Kente
Collieries (supra) , it laid down that the courts
do not sit in appeal over arbitral awards,
therefore, the jurisdiction of the concerned
courts is confined to specific grounds as laid
down under Section 34 of the 1996 Act, for
instance, violation of public policy, patent
illegality, or misconduct. Furthermore, it is
based on the principle of party autonomy and
the need to uphold the finality of an arbitral
award. Concluding, it iterated that when the
parties have, through conscious decision-
making, opted for arbitration as an alternative
means of dispute mechanism, the courts ought
to refrain from reappreciation of evidence or
substitution of interpretation(s), unless the
award is perverse, unreasonable, or contrary to

53
(2020) 12 SCC 539
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the mandate of the statute or decisions of court.
The relevant paragraphs are as follows:
“ 16. As it is, the jurisdiction conferred on
courts under Section 34 of the Arbitration Act
is fairly narrow, when it comes to the scope of
an appeal under Section 37 of the Arbitration
Act, the jurisdiction of an appellate court in
examining an order, setting aside or refusing
to set aside an award, is all the more
circumscribed. In MMTC Ltd. v. Vedanta
Ltd. [(2019) 4 SCC 163 : (2019) 2 SCC (Civ)
293] , the reasons for vesting such a limited
jurisdiction on the High Court in exercise of
powers under Section 34 of the Arbitration Act
have been explained in the following words :
(SCC pp. 166-67, para 11)
‘11. As far as Section 34 is concerned, the
position is well-settled by now that the
Court does not sit in appeal over the arbitral
award and may interfere on merits on the
limited ground provided under Section
34(2)(b)(ii) i.e. if the award is against the
public policy of India. As per the legal
position clarified through decisions of this
Court prior to the amendments to the 1996
Act in 2015, a violation of Indian public
policy, in turn, includes a violation of the
fundamental policy of Indian law, a
violation of the interest of India, conflict with
justice or morality, and the existence of
patent illegality in the arbitral award.
Additionally, the concept of the
‘fundamental policy of Indian law’ would
cover compliance with statutes and judicial
precedents, adopting a judicial approach,
compliance with the principles of natural
justice, and Wednesbury [Associated
Provincial Picture Houses
Ltd. v. Wednesbury Corpn., (1948) 1 KB
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223 (CA)] reasonableness. Furthermore,
‘patent illegality’ itself has been held to
mean contravention of the substantive law
of India, contravention of the 1996 Act, and
contravention of the terms of the contract.’
17. A similar view, as stated above, has been
taken by this Court in K.
Sugumar v. Hindustan Petroleum Corpn.
Ltd. [(2020) 12 SCC 539], wherein it has been
observed as follows : (SCC p. 540, para 2)
‘2. The contours of the power of the Court
under Section 34 of the Act are too well
established to require any reiteration. Even
a bare reading of Section 34 of the Act
indicates the highly constricted power of the
civil court to interfere with an arbitral
award. The reason for this is obvious. When
parties have chosen to avail an alternate
mechanism for dispute resolution, they
must be left to reconcile themselves to the
wisdom of the decision of the arbitrator and
the role of the court should be restricted to
the bare minimum. Interference will be
justified only in cases of commission of
misconduct by the arbitrator which can find
manifestation in different forms including
exercise of legal perversity by the
arbitrator.’
18. It has also been held time and again by
this Court that if there are two plausible
interpretations of the terms and conditions of
the contract, then no fault can be found, if the
learned arbitrator proceeds to accept one
interpretation as against the other. In Dyna
Technologies (P) Ltd. v. Crompton Greaves
Ltd. [(2019) 20 SCC 1] , the limitations on the
Court while exercising powers under Section
34 of the Arbitration Act has been highlighted
thus : (SCC p. 12, para 24)
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‘24. There is no dispute that Section 34 of
the Arbitration Act limits a challenge to an
award only on the grounds provided therein
or as interpreted by various Courts. We
need to be cognizant of the fact that arbitral
awards should not be interfered with in a
casual and cavalier manner, unless the
Court comes to a conclusion that the
perversity of the award goes to the root of
the matter without there being a possibility
of alternative interpretation which may
sustain the arbitral award. Section 34 is
different in its approach and cannot be
equated with a normal appellate
jurisdiction. The mandate under Section 34
is to respect the finality of the arbitral
award and the party autonomy to get their
dispute adjudicated by an alternative forum
as provided under the law. If the Courts
were to interfere with the arbitral award in
the usual course on factual aspects, then
the commercial wisdom behind opting for
alternate dispute resolution would stand
frustrated.’
19. In Parsa Kente Collieries
Ltd. v. Rajasthan Rajya Vidyut Utpadan
Nigam Ltd. [(2019) 7 SCC 236 : (2019) 3 SCC
(Civ) 552] , adverting to the previous decisions
of this Court in McDermott International
Inc. v. Burn Standard Co. Ltd. [(2006) 11 SCC
181] and Rashtriya Ispat Nigam
Ltd. v. Dewan Chand Ram Saran [(2012) 5
SCC 306] , wherein it has been observed that
an Arbitral Tribunal must decide in
accordance with the terms of the contract, but
if a term of the contract has been construed in
a reasonable manner, then the award ought
not to be set aside on this ground, it has been
held thus : Parsa Kente Collieries
Ltd. v. Rajasthan Rajya Vidyut Utpadan
Civil Appeal @ SLP (C) No.2706/2024 Page 60 of 106

Nigam Ltd. [(2019) 7 SCC 236 : (2019) 3 SCC
(Civ) 552] , SCC pp. 244-45, para 9)
‘9.1. … It is further observed and held that
construction of the terms of a contract is
primarily for an arbitrator to decide unless
the arbitrator construes the contract in such
a way that it could be said to be something
that no fair-minded or reasonable person
could do. It is further observed by this Court
in the aforesaid decision in para 33 that
when a court is applying the “public policy”
test to an arbitration award, it does not act
as a court of appeal and consequently
errors of fact cannot be corrected. A
possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator
is the ultimate master of the quantity and
quality of evidence to be relied upon when
he delivers his arbitral award. It is further
observed that thus an award based on little
evidence or on evidence which does not
measure up in quality to a trained legal
mind would not be held to be invalid on this
score.
9.2. Similar is the view taken by this Court
in NHAI v. ITD Cementation India
Ltd. [(2015) 14 SCC 21 : (2016) 2 SCC (Civ)
716], SCC para 25 and SAIL v. Gupta
Brother Steel Tubes Ltd. [(2009) 10 SCC 63
: (2009) 4 SCC (Civ) 16], SCC para 29.’
(emphasis supplied) ”


69. Now, it is opportune to refer to the provision of
Section 37 of the 1996 Act with that of the scope
of Section 34 to reiterate and postulate the
jurisprudence of interference, which reads thus:
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“37. Appealable orders .—(1)
Notwithstanding anything contained in any
other law for the time being in force, an appeal
shall lie from the following orders (and from no
others) to the Court authorised by law to hear
appeals from original decrees of the Court
passing the order, namely:—
(a) refusing to refer the parties to
arbitration under section 8;
(b) granting or refusing to grant any
measure under section 9;
(c) setting aside or refusing to set aside an
arbitral award under section 34.
(2) An appeal shall also lie to a Court from an
order of the arbitral tribunal.—
(a) accepting the plea referred to in sub-
section (2) or sub-section (3) of section
16; or
(b) granting or refusing to grant an interim
measure under section 17.
(3) No second appeal shall lie from an order
passed in appeal under this section, but
nothing in this section shall affect or take
away any right to appeal to the Supreme
Court.”

70. A perusal of the aforesaid elaborates that an
appeal lies against an order of either setting
aside of an arbitral award or refusal thereof
under Section 34 of the 1996 Act under Section
37 Sub-Section 1 Clause (c) of the 1996 Act. The
provision, as also interpreted by decisions of
courts in India, demonstrates that the scope
under Section 37 is inherently limited or rather,
narrower, and is governed by the mandate or
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parameters or grounds under Section 34 Sub-
Section 2 of the 1996 Act.
71. The decision in MMTC Limited (supra) , as
referenced recently by a coordinate Bench of
Reliance Infrastructure Limited
this Court in
(supra), unfolds in an involute manner that a
court under Section 37 of the 1996 Act can only
determine as to whether the concerned court
under Section 34 has not travelled beyond the
parameters of the scope therein. No
independent evaluation is permitted on the
merits of the award. An observation to a similar
corollary was also determined by a 3-Judge
Bench of this Court in Konkan Railway
Corporation Limited v. Chenab Bridge
54
Project Undertaking , while assailing the
reinterpretation of the contractual terms in the
following manner:
“25. The principle of interpretation of
contracts adopted by the Division Bench of the
High Court that when two constructions are
possible, then courts must prefer the one
which gives effect and voice to all clauses,
does not have absolute application. The said
interpretation is subject to the jurisdiction
which a court is called upon to exercise. While

54
(2023) 9 SCC 85
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exercising jurisdiction under Section 37 of the
Act, the Court is concerned about the
jurisdiction that the Section 34 Court exercised
while considering the challenge to the arbitral
award. The jurisdiction under Section 34 of the
Act is exercised only to see if the Arbitral
Tribunal's view is perverse or manifestly
arbitrary. Accordingly, the question of
reinterpreting the contract on an alternative
view does not arise. If this is the principle
applicable to exercise of jurisdiction under
Section 34 of the Act, a Division Bench
exercising jurisdiction under Section 37 of the
Act cannot reverse an award, much less the
decision of a Single Judge, on the ground that
they have not given effect and voice to all
clauses of the contract. This is where the
Division Bench of the High Court committed an
error, in re-interpreting a contractual clause
while exercising jurisdiction under Section 37
of the Act. In any event, the decision in Radha
Sundar Dutta v. Mohd. Jahadur Rahim [AIR
1959 SC 24] , relied on by the High Court was
decided in 1959, and it pertains to
proceedings arising under the Village
Chaukidari Act, 1870 and Bengal Patni Taluks
Regulation of 1819. Reliance on this judgment
particularly for interfering with the concurrent
interpretations of the contractual clause by the
Arbitral Tribunal and Single Judge under
Section 34 of the Act is not justified.”

72. A juxtaposition of this provision with the
jurisprudence of the Code of Civil Procedure,
1908 instantiates it to function akin to a second
appeal under the latter. While the initial probe
is initiated during a recourse under Section 34
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of the 1996 Act, and if it further affirms the
award, a court exercising the mandate of
Section 37 ought to employ caution and
reluctance to alter with the concurrent findings.

73. Before we commence with the analysis of the
dispute(s) raised before us, it is apposite to also
refer to the arbitration agreement as adopted by
the parties in Section 21.4 of the Amended
CWEETC Agreement (hereinafter “Arbitration
Agreement”), which reads thus:
“21.4 Arbitration
21.4.1 Any Dispute which has not been
resolved by negotiation and
mediation pursuant to Section 21.3
shall, following notice by either
Party, be exclusively and finally
decided by arbitration in Singapore
in accordance with the provisions of
the (Indian) Arbitration and
Conciliation Act, 1996 or any re-
enactment or modification thereof.
Save as specified in this Section
21.4.1, no arbitration provisions
contained in any other law, shall
apply to arbitration of any Dispute.
21.4.2 Pursuant to Section 21.4.1, either
Party may notify the other Party by
a written notice clearly stating all
the Disputes to be decided by the
arbitral tribunal, appointing its own
arbitrator and calling upon the other
Party to appoint its arbitrator within
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thirty (30) days from the date of
receipt of such notice.
(i) Both the arbitrators
appointed by the Parties
shall then appoint the third
arbitrator, who shall act as
chairman of the tribunal, and
if the chairman is not
appointed within thirty (30)
days of the date of
appointment of the later of
the two (2) arbitrators
appointed by the Parties. or
if a Party does not appoint an
arbitrator within thirty (30)
days of the date of the
receipt of the notice of the
other Party, the chairman
and/or the arbitrator to be
appointed by a Party (such
Party having failed to
appoint the arbitrator) shall
be appointed in accordance
with the provisions of the
(Indian) Arbitration and
Conciliation Act, 1996.
(ii) Each arbitrator shall be and
remain independent and
impartial, and no arbitrator
shall be of the same
nationality as any Party.
21.4.3 The arbitrators shall draw up, and
submit to the Parties for signature,
the terms of reference within fifteen
(15) days of the appointment of the
third arbitrator. The terms of
reference shall include a list of
issues to be determined.
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21.4.4 Neither Party shall be required to
give general disclosure of
documents, but may be required to
produce documents which are
relevant to the Dispute.
21.4.5 The arbitral proceedings shall be
conducted in the English language.
xxx xxx xxx
21.4.7 The arbitral award shall be final and
binding upon the Parties and
enforceable by any court having
jurisdiction for this purpose. The
arbitral award may be enforced
against the Parties to the arbitration
proceeding or their assets wherever
they may be found and a judgment
upon the arbitral award may be
entered in any court having
jurisdiction.”

74. It is also apposite to refer to Section 25.2 of the
Amended CWEETC Agreement, which stipulates
as follows:
“25.2 Choice of Law
25.2.1 Governing law
This Agreement shall be governed by and
construed in accordance with the laws of
England. The United Nations Convention on
Contracts for the International Sale of
Goods shall not apply to this Agreement.
25.2.2 Contracts (Rights of Third Parties)
Act 1999
Save as expressly provided for in terms
hereof, this Agreement does not create any
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right under the Contracts (Rights of Third
Parties) Act 1999 which is enforceable by
any person.”


75. An examination of the Arbitration Agreement
indicates that with the express exclusion of the
United Nations Convention on Contracts for the
International Sale of Goods (hereinafter,
“CISG”), the substantive law and interpretation
of the contractual terms shall be governed by
the laws of England, thereby it being the lex
55
contractus . The parties have further
determined Singapore and the 1996 Act to be
the venue and seat respectively.
76. As described in the provision of Section 20 of the
1996 Act, the place of arbitration is a reference
to the seat of arbitration, and reads:
“ 20. Place of arbitration. —
(1) The parties are free to agree on the place of
arbitration.
(2) Failing any agreement referred to in sub-
section (1), the place of arbitration shall be
determined by the arbitral tribunal having
regard to the circumstances of the case,
including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-
section (2), the arbitral tribunal may, unless
otherwise agreed by the parties, meet at any
place it considers appropriate for consultation

55
Law governing the contract
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among its members, for hearing witnesses,
experts or the parties, or for inspection of
documents, goods or other property.”

77. Undoubtedly, in the absence of the express or
implied choice of law, it is the law that has the
closest as well as the most real connection with
the arbitration agreement, that is applicable.
This position was recently iterated by a 3-Judge
Bench of this Court while dealing with an
application under Section 11 Sub-Section 6 of
the 1996 Act, in Disortho S.A.S. v. Meril Life
56
Sciences Private Limited .

78. Herein, the 1996 Act is laid down as the law
governing the Arbitration Agreement, and
therefore it is apposite to reiterate that the lex
57
arbitri , in the absence of determination
otherwise, is determined by the seat of the
arbitration as also iterated through extensive
deliberation by 3-Judge Bench of this Court in
Government of India v. Vedanta Limited and
58
Others . Therein, the court further explicated
that a challenge to an award is to be undertaken

56
2025 SCC OnLine SC 570
57
Law of the arbitration
58
(2020) 10 SCC 1
Civil Appeal @ SLP (C) No.2706/2024 Page 69 of 106

against the cornerstone of domestic public
policy of the seat of the arbitration. This
position is also impliedly conceded and
admitted on behalf of SEPCO through their
conduct, especially when relying significantly on
decisions of Indian courts to assert their
grounds for challenge and the law in India
thereof. Significant reliance was placed by
SEPCO on the decision of this Court in
Ssangyong Engineering (supra) , as also relied
upon by the Impugned Judgment.
79. Clarifying on the distinction between the seat of
arbitration and venue of arbitration
proceedings, observations of this Court in
Enercon (India) Limited and Others v.
59
Enercon Gmbh and Another reiterates that
when a seat of arbitration is India, it would only
be the courts of India that would have exclusive
jurisdiction to determine any disputes
pertaining to the process of arbitration thereof.
80. While being betwixt and between the
determination of the applicable law, it is

59
(2014) 5 SCC 1
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prudent to refer to Section 28 Sub-Section 1
Clause (b) Sub-Clause (i) of the 1996 Act, which
is reproduced below:
“ 28. Rules applicable to substance of
dispute. ––

xxx xxx xxx

(b) in international commercial arbitration,––
(i) the arbitral tribunal shall decide the
dispute in accordance with the rules of law
designated by the parties as applicable to
the substance of the dispute;”

81. Through a holistic appreciation of the Section
28 Sub-Section (1) Clause (b), along with Sub-
Clause (i), it is prima facie comprehensible that
International Commercial Arbitrations, wherein
seat has been adopted to be India or the 1996
Act, are always subject to Section 28 Sub-
Section (1) Clause (b) of the 1996 Act, which, in
turn, emphasizes that fundamental principle of
party autonomy. The parties to a dispute are
always at liberty to choose the substantive law,
procedural law, and the law of the arbitration
agreement so applicable. Party autonomy is
widely acknowledged as the foundation of the
contemporary arbitration and is protected by
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the arbitral legislations, numerous institutional
guidelines and international treaties.
82. Having observed as aforesaid, the principle of
party autonomy does not vest absolutely.
Although the parties have a great deal of
discretion in choosing the governing law, their
choices cannot conflict with the mandatory
provisions in the jurisdiction of the seat of the
concerned arbitration. Beyond a doubt, the laws
governing the arbitration agreement, the
substantive contract, and the procedural
conduct of the arbitration may differ, as in the
instant case. To reiterate, the parties have, as
per the settled law and the gestation of party
autonomy, adopted for the English law to be
applicable to the substantive interpretation of
the contractual terms, while the procedural
aspect, as it appears from the aforesaid
reflection of the jurisprudence, shall be
governed by the laws of the land of this nation,
being India, for its law of arbitration, the 1996
Act, being the seat.
83. Let us first proceed to analyse whether the
Arbitral Award was correct in determining oral
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waiver and/or equity estoppel as against the
terms of the contract.
84. The concerned Sections under the Amended
CWEETC Agreement read as follows:
“ 25.5 No Waiver or Variation
25.5.1 No failure or neglect on the part of
either Party to exercise its rights or
remedies under this Agreement and
no single or partial exercise thereof
shall preclude any further or other
exercise of such rights and
remedies.
25.5.2 Any delay, waiver or omission by
either Party to exercise any right or
power arising from any breach or
default by the other Party in any of
the terms or provisions of this
Agreement shall not be construed to
be a waiver of such breach or
default or subsequent breach or
default of the same or other terms,
provisions or covenants.
25.5.3 Without prejudice to Section 4.2
and the issue of any Variation
Order, no variation, amendment,
supplement, modification or waiver
of this Agreement shall be effective
unless in writing and signed by or
on behalf of each Party.”

85. Moving on to the issue of notice between the
parties vis-à-vis the apparent waiver and/or
application of estoppel, it is pellucid from the
perusal of the paragraph 226 of the Arbitral
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Award that the Arbitral Tribunal had rejected
the contention raised on behalf of SEPCO that
the condition precedent for allegedly mandatory
contractual notices stood waived by the parties
in March 2010. Despite this, and without it
being raised on behalf of SEPCO, the Arbitral
Tribunal placed reliance on the Jinan
Agreement and the concerned emails from
March 2012 that the condition for contractual
notices was waived. GMRKE Limited was never
given an opportunity to exhibit evidence to this
effect. This observation on behalf of the Arbitral
Tribunal amounted to modification of the terms
of the contract.
86. We are in agreement with the submissions made
by GMRKE Limited to the said effect through
their aspect of reliance to assert that the
safeguards and prerequisites laid down in Rock
Advertising (supra) squarely cover the field
with respect to the instant case. No material was
adduced to establish satisfaction of the
conditions laid down in the aforesaid decision,
being, unequivocal words or conducts to
present that such a deviation was valid, and
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something travelling over and above an informal
promise between the parties.
87. SEPCO is therefore mistaken to contend that
while notices may be dispensed for claims for
prolongation costs and delay but not for defects
within the Defect Liability Period. It strikes at
the root of Section 18 of the 1996 Act, which is
dealt with in detail below by us. Even further,
Section 7.3.2 of the Amended CWEETC
Agreement explicitly mandates the notice, and
reads:
“Unless otherwise specified in this Agreement,
within seventy-two (72) hours or such other
period as may be agreed by the Owner of
learning of any cause of delay or disruption to
the progress of the Works, the Civil Contractor
shall submit a notice providing full details
relevant to such cause, except to the extent the
Civil Contractor cannot submit all relevant
details within such period because the cause
of delay or disruption continued for a period
exceeding seven (7) days. The Civil Contractor
shall submit interim details at intervals of not
more than seven (7) days (from the first day of
such delay or disruption) and full and final
supporting details together with full
supporting documentation in support of its
application within fourteen (14) days of the
date of cessation of such delay or disruption.
Further in all cases where events described in
Section 7.3.1 have occurred, the Civil
Contractor shall advise the Owner of:
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(a) the extent of the actual and
contemplated delay and its anticipated
effect upon the relevant Milestone Date and
or Guaranteed Date of Completion:
(b) the Civil Contractor's plans to take steps
to overcome or minimise the actual or
anticipated delay and the increased costs,
if any, associated therewith: and
(c) the Civil Contractor's plans to adopt any
methods suggested by the Owner to
overcome or minimise the delay and the
increased costs, if any, associated
therewith, and the Civil Contractor shall use
all reasonable endeavours to take such
steps and or adopt such methods.”

88. Both the Arbitral Tribunal as well as the Single
Judge of the High Court were mistaken to grant
relief to SEPCO, upholding the assumed waiver
of the mandate of notice despite explicit
provisions of the Amended CWEETC Agreement
to the otherwise effect.
89. Moreover, the issue of waiver also juxtaposes
itself to the mandate of Section 28 Sub-Section
3 of the 1996 Act, which ought to be additionally
scrutinized.
90. The 1996 Act, through the mandate of Section
28 Sub-Section 3, casts an explicit duty on a
tribunal to resolve disputes in accordance with
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the terms of the contract and accepted business
practices. For context, the bare provision reads
as follows:

“ 28. Rules applicable to substance of
dispute. ––

xxx xxx xxx

(3) While deciding and making an award,
the arbitral tribunal shall, in all cases, take
into account the terms of the contract and
trade usages applicable to the transaction.”

91. Numerous precedents laid down by this Court
have often emphasised that an arbitrator lacks
the power to deviate from or to reinterpret the
terms of the contract while making an award.
The awards must be within the parameters of
the agreement entered between the parties.

92. This Court in Saw Pipes (supra) has reiterated
that any deviation from the mandate of Section
28 Sub-Section 3 of the 1996 Act is a valid
ground for lambasting an arbitral award.
Commenting on the duty of the arbitrators, this
Court observed as follows:
“ 73. It is to be reiterated that it is the primary
duty of the arbitrators to enforce a promise
which the parties have made and to uphold
the sanctity of the contract which forms the
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basis of the civilized society and also the
jurisdiction of the arbitrators. Hence, this part
of the award passed by the Arbitral Tribunal
granting interest on the amount deducted by
the appellant from the bills payable to the
respondent is against the terms of the contract
and is, therefore, violative of Section 28(3) of
the Act.”

93. To substantiate that the contract is paramount
to the working, scope, and interpretation for the
purpose of an award by the arbitrator, a
reference may be made to another 3-Judge
Bench decision in South East Asia Marine
Engineering and Constructions Limited v.
60
Oil India Limited . Therein, while rejecting
the challenge to setting aside of the arbitral
award, this Court made the following
observations:
“28. In this context, the interpretation of
Clause 23 of the contract by the Arbitral
Tribunal, to provide a wide interpretation
cannot be accepted, as the thumb rule of
interpretation is that the document forming a
written contract should be read as a whole
and so far as possible as mutually
explanatory. In the case at hand, this basic
rule was ignored by the Tribunal while
interpreting the clause.
29. The contract was entered into between the
parties in furtherance of a tender issued by the
respondent herein. After considering the

60
(2020) 5 SCC 164
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tender bids, the appellant issued a letter of
intent. In furtherance of the letter of intent, the
contract (Contract No. CCO/FC/0040/95) was
for drilling oil wells and auxiliary operations.
It is important to note that the contract price
was payable to the “contractor” for full and
proper performance of its contractual
obligations. Further, Clauses 14.7 and 14.11
of the contract state that the rates, terms and
conditions were to be in force until the
completion or abandonment of the last well
being drilled.
30. From the aforesaid discussion, it can be
said that the contract was based on a fixed
rate. The party, before entering the tender
process, entered the contract after mitigating
the risk of such an increase. If the purpose of
the tender was to limit the risks of price
variations, then the interpretation placed by
the Arbitral Tribunal cannot be said to be
possible one, as it would completely defeat the
explicit wordings and purpose of the contract.
There is no gainsaying that there will be price
fluctuations which a prudent contractor would
have taken into margin, while bidding in the
tender. Such price fluctuations cannot be
brought under Clause 23 unless specific
language points to the inclusion.
31. The interpretation of the Arbitral Tribunal
to expand the meaning of Clause 23 to include
change in rate of HSD is not a possible
interpretation of this contract, as the appellant
did not introduce any evidence which proves
the same.”

94. Further clarification of this proposition is
brought about through observations of this
Court in a further decision by 3-Judge Bench in
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Union of India and Others v. Bharat
61
Enterprise wherein it was underlined that the
existence and powers of an arbitrator are a
creature of the agreement between the parties,
and it is the terms of the contract which serves
as a fundamental basis for the procedure to be
adopted by the arbitral tribunal. Therefore, the
concerned arbitrator is restricted to the terms of
the contract thereof and cannot go outside its
scope or what is, per se , specified. In words of
the Bench, “ A disregard of the specific provisions
of the contract would incur wrath of the Award
being imperiled. This position cannot be in the
region of dispute. ”
95. In order to achieve an enhanced understanding
apropos the scope of the powers and jurisdiction
of an arbitrator, a reference may also be made
to a decision of this Court in Associated
Engineering (supra), which was determined
vis-à-vis Section 30 of the Arbitration Act, 1940
wherein, it was observed that:
“ 24. The arbitrator cannot act arbitrarily,
irrationally, capriciously or independently of
the contract. His sole function is to arbitrate in

61
2023 SCC OnLine SC 369
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terms of the contract. He has no power apart
from what the parties have given him under
the contract. If he has travelled outside the
bounds of the contract, he has acted without
jurisdiction. But if he has remained inside the
parameters of the contract and has construed
the provisions of the contract, his award
cannot be interfered with unless he has given
reasons for the award disclosing an error
apparent on the face of it.
25. An arbitrator who acts in manifest
disregard of the contract acts without
jurisdiction. His authority is derived from the
contract and is governed by the Arbitration Act
which embodies principles derived from a
specialised branch of the law of agency (see
Mustill and Boyd's Commercial Arbitration,
2nd edn., p. 641). He commits misconduct if by
his award he decides matters excluded by the
agreement (see Halsbury's Laws of England,
Volume II, 4th edn., para 622). A deliberate
departure from contract amounts to not only
manifest disregard of his authority or a
misconduct on his part, but it may tantamount
to a mala fide action. A conscious disregard of
the law or the provisions of the contract from
which he has derived his authority vitiates the
award.
26. A dispute as to the jurisdiction of the
arbitrator is not a dispute within the award,
but one which has to be decided outside the
award. An umpire or arbitrator cannot widen
his jurisdiction by deciding a question not
referred to him by the parties or by deciding a
question otherwise than in accordance with
the contract. He cannot say that he does not
care what the contract says. He is bound by it.
It must bear his decision. He cannot travel
outside its bounds. If he exceeded his
jurisdiction by so doing, his award would be
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liable to be set aside. As stated by Lord
Parmoor : [Attorney-General for
Manitoba v. Kelly, (1922) 1 AC 268, 276 :
1922 All ER Rep 69] (AC p. 276)
‘It would be impossible to allow an umpire
to arrogate to himself jurisdiction over a
question which, on the true construction of
the submission, was not referred to him. An
umpire cannot widen the area of his
jurisdiction by holding, contrary to the fact,
that the matter which he affects to decide is
within the submission of the parties.’
Evidence of matters not appearing on the face
of the award would be admissible to decide
whether the arbitrator travelled outside the
bounds of the contract and thus exceeded his
jurisdiction. In order to see what the
jurisdiction of the arbitrator is, it is open to the
court to see what dispute was submitted to
him. If that is not clear from the award, it is
open to the court to have recourse to outside
sources. The court can look at the affidavits
and pleadings of parties; the court can look at
the agreement itself. Bunge & Co. v. Dewar
and Webb [(1921) 8 Ll L Rep 436].
27. If the arbitrator commits an error in the
construction of the contract, that is an error
within his jurisdiction. But if he wanders
outside the contract and deals with matters
not allotted to him, he commits a jurisdictional
error. Such error going to his jurisdiction can
be established by looking into material outside
the award. Extrinsic evidence is admissible in
such cases because the dispute is not
something which arises under or in relation to
the contract or dependent on the construction
of the contract or to be determined within the
award. The dispute as to jurisdiction is a
matter which is outside the award or outside
whatever may be said about it in the award.
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The ambiguity of the award can, in such
cases, be resolved by admitting extrinsic
evidence. The rationale of this rule is that the
nature of the dispute is something which has
to be determined outside and independent of
what appears in the award. Such
jurisdictional error needs to be proved by
evidence extrinsic to the award. [See Alopi
Parshad & Sons, Ltd. v. Union of India [(1960)
2 SCR 793 : AIR 1960 SC 588] ; Bunge &
Co. v. Dewar & Webb [(1921) 8 Ll L Rep 436]
; Christopher Brown Ltd. v. Genossenschaft
Oesterreichischer [(1954) 1 QB 8 : (1953) 3
WLR 689] ; Rex v. Fulham [(1951) 2 QB 1 :
(1951) 1 All ER 482] ; Falkingham v. Victorian
Railways Commission [1900 AC 452 : 69 LJ
PC 89] ; Rex v. All Saints,
Southampton [(1828) 7 B&C 785 : 1 Man &
Rey KB 663] ; Laing (James), Son & Co. (M/C)
Ltd. v. Eastcheap Dried Fruit Co. [(1961) 1 Ll L
Rep 142, 145] ; Dalmia Dairy Industries
Ltd. v. National Bank of Pakistan [(1978) 2 Ll
L Rep 223] ; Heyman v. Darwins Ltd. [(1942)
AC 356 : (1942) 1 All ER 337] ; Union of
India v. Kishorilal Gupta & Bros. [AIR 1959 SC
1362 : (1960) 1 SCR 493] ; Renusagar Power
Co. Ltd. v. General Electric Company [(1984) 4
SCC 679 : (1985) 1 SCR 432]
; Jivarajbhai v. Chintamanrao [(1964) 5 SCR
480 : AIR 1965 SC 214] ; Gobardhan
Das v. Lachhmi Ram [AIR 1954 SC 689, 692]
; Thawardas Pherumal v. Union of
India [(1955) 2 SCR 48 : AIR 1955 SC 468]
; Omanhene Kobina Foli v. Chief Obeng
Akessee [AIR 1934 PC 185, 188 : 40 MLW 138]
; F.R. Absalom, Ltd. v. Great Western (London)
Garden Village Society, Limited [(1933) AC
592 : 1933 All ER Rep 616] and M.
Golodetz v. Schrier [(1947) 80 Ll L Rep 647] .] ”

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96. Examining the principles involved, a reference
to decisions under the Arbitration Act, 1940,
may also be apprised through the decision of a
3-Judge Bench of this Court in Allen Berry and
62
Co. Pvt. Ltd. v. Union of India, New Delhi

wherein this Court considered the proper scope
of judicial review of arbitral awards and iterated
that a court has the right to review documents
that are specifically included in an award while
reviewing it. However, as also observed in some
cases, the courts, especially in the United
Kingdom, have travelled farther and set aside
the awards in which the contracts have merely
been referred in passing, and apparently were
incorrectly incorporated, forming the
foundation of a verboten award.
97. Moreover, as referred, the King’s Bench
63
invalidated an award in Landauer v. Asser
because the arbitrator had misconstrued the
provisions of the insurance contract. A similar
position was adopted by the House of Lords in
Absalom (F.R.) Ltd. v. Great Western (London)

62
(1971) 1 SCC 295
63
[1905] 2 KB 184
Civil Appeal @ SLP (C) No.2706/2024 Page 84 of 106

64
Garden Village Society Ltd . , where the
award specifically included a clause 30 of the
contract, calling for judicial scrutiny of the
interpretation of the arbitrator. In Champsey
Bhara and Co. v. Jivraj Balloo Spinning &
65
Weaving Co. Ltd. , the Privy Council dealt
with the validity of the decision in Landauer
(supra) and therein it was clarified that only a
legal error that is evident on the face of the
award or in an incorporated document warrants
an interference by the courts, as also iterated in
66
Duff Development Co. v. Kelanton . Even
prior to Allen Berry (supra), this Court
supported a similar strategy in Babu Ram v.
67
Nanhemal . Therefore, it appears that even if
the arbitrator’s legal or factual reasoning is
faulty, the courts ought to ideally refrain from
interfering with an award until an error of law is
evident from the award itself or in a document
that forms an integral component thereof.

64
[1933] AC 592
65
(1923) AC 480 (PC)
66
[1923] AC 395
67
Judgment dated 05.12.1968 in Civil Appeal No 107 of 1966
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98. A perusal therefore crystalises that it is the
interpretation of an arbitral award which
determines whether a contract or a specific
provision thereof is considered part of the award
or not. If a clear reliance is placed by the
arbitrator on the contract, a presumption arises
in favour of the incorporation, while a vague or
general reference opposes such a presumption.
99. The act of the Arbitral Tribunal as well as the
Single Judge of the High Court failed to stand
on the test of deliberate and explicit intention of
the parties to relinquish their right as observed
in Sasan Power Limited (supra) .
100. Even under the current arbitration regime,
judicial intervention is narrowly confined to
specific, enumerated grounds. Arbitral
decisions must adhere to natural justice, and
cannot rest solely on personal beliefs or
perceived moral duties. But it appears that the
Arbitral Award has extensively relied upon the
terms of the contract(s), and it was appropriate
and good in law on the part of the Division
Bench to peruse the contractual terms between
the parties. Moreover, it would not be arrogate
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to refer to and rely upon the provisions of the
Amended CWEETC Agreement.
101. Firstly, on bias, dealing with the issue of waiver,
the Arbitral Tribunal, as observed aforesaid,
had incorrectly rewritten the terms of the
Amended CWEETC Agreement to falsely
empower SEPCO for their claims, despite non-
compliance of the contractual provisions. It is to
be also noted that the Single Judge of the High
Court had rejected the contention of GMRKE
Limited to the effect of assumption of arguments
raised by SEPCO and the discriminatory
treatment of the parties thereof by the Arbitral
Tribunal in a cursory manner. Furthermore,
while dealing with the contention of waiver of
notice vis-à-vis the provisions of the Amended
CWEETC Agreement, it despite acknowledging
insufficiency of material on record to conclude
the right to estoppel under common law or the
assumed oral waiver of notice, observed that
same cannot still be a ground for interference.
102. Secondly, dealing with claims the extent of
claims of SEPCO post its termination, especially
to seek 5 percent of the contractual price upon
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completion of the tests, it is appropriate to refer
to the relevant portions of the conditions laid
down in the Amended CWEETC Agreement,
which are read as follows:
6.1.5 Reliability Run
6.1.5.1 Reliability Run is to be conducted
only after successful completion of
the Initial Operation and have to
be successfully completed prior to
the commencement of the Unit
Characteristics Tests.
All necessary adjustments shall
be made to the respective Unit
while operating over the full range
enabling the respective Unit to be
made ready for the Reliability
Run. The Reliability Run shall
only be carried out provided the
respective Unit is fully available
for full load operation. The
duration of the Reliability Run
shall be as specified in the
Technical Specifications.
6.1.5.2 The Reliability Run shall be
considered successful provided
that the requirements set forth in
the Technical Specifications have
been satisfied.
6. l .5.3 For the determination of the
period of the Reliability Run the
time of actual operation shall be
measured. In case the duration of
actual continuous operation
during the test period as per the
Technical Specifications is
discontinued for causes
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attributable to the Owner, the
Civil Contractor would have been
deemed to have operated the
Unit(s) or the Power Station at the
required load during such period
of discontinuation. However, in
such cases the Owner can, at its
option, require the period of the
test to be extended appropriately
in which case the Civil Contractor
would be eligible for an extension
of the relevant Milestone Date or
Guaranteed Date of Completion
by an equivalent period and any
additional costs reasonably
incurred by the Civil Contractor
for such extension shall be
reimbursed.
However, should any test that is
part of the Reliability Run (as set
forth in the Technical
Specification) be discontinued due
to any default of the Civil
Contractor or any Subcontractor,
such test shall he conducted
again. Should any failure (other
than that of an entirely minor
nature) due to or arising out of
faulty design, materials, or
workmanship or omissions,
incorrect erection or improper
operating instructions occur in
any part or all of the respective
Unit or the Power Station, as the
case may be, in a manner that
prevents safe commercial use of
the respective Unit or the Power
Station, as the case may be, a
Reliability Run period of fourteen
(14) days shall be conducted after
the detect has been remedied. The
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onus of proving that any failure is
not due to faulty design, materials
and workmanship shall lie solely
with the Civil Contractor.
6.1.5.4 Reliability Run would be deemed
to have been successfully
completed only after the Owner
has agreed in writing to such test
report or the test is deemed to
have been successfully completed
in accordance with this Section
6.1.
6.1.6 Unit Characteristic Tests
6.1.6.1 The Unit Characteristic Tests are
to be carried out to demonstrate
compliance of the respective Unit
or the Power Station, as the case
may be, with the required
functional capabilities as per the
agreed parameters and will be
conducted in accordance with and
as particularly described in the
Technical Specifications.
6.1.6.2 Unit Characteristic Tests would
be deemed to have been
successfully completed only after
the Owner has agreed in writing
to a satisfactory test report or the
test is deemed to have been
successfully completed in
accordance with Section
6.1.4.6(iv) and the Technical
Specifications.
6.1.7 Performance Guarantee Test
6.1.7.1 General conditions for
Performance Guarantee Test
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The Performance Guarantee Test
would be conducted to determine
the level of achievement of the
Performance Guarantees for the
purpose of Take Over of the
respective Units or the Power
Station, as the case may be. The
Performance Guarantee Test for
the Power Station shall be
successfully completed alongwith
the Performance Guarantee Test
for the last Unit. The Performance
Guarantee Test would be
conducted over a continuous
period of seventy-two (72) hours
without any interruption. The
Performance Guarantee Test for
each Unit and the Power Station
shall be successfully completed
within a period of two hundred
and twenty (220) days from the
respective dates of' successful
completion of the Reliability Run.
The Performance Guarantee Tests
may be carried out for a maximum
number of three (3) tests only.
Further, provided that the
cumulative aggregate shut-down
period for preparing to conduct the
three (3) tests shall not exceed a
period of nineteen (19) days.
The Power Station or any Unit
thereof will not be deemed ready
for the Performance Guarantee
Test if any of the following
conditions exists:

(a) the Reliability Run and
the Unit Characteristic
Tests have not been
successfully completed as
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per the provisions of this
Section 6.1;
(b) the Owner has given
notice, to the Civil
Contractor, specifying the
reasons therefor in
accordance with this
Agreement, that the
Works necessary for the
safe performance of such
tests have not been
performed or are
incomplete or defective.”
(underlining is ours)


103. A perusal of the contractual provisions clearly
highlights that the Division Bench was correct
to observe that owing to the well-recorded
failure of the Unit Characteristics Test for Unit
1, the Arbitral Tribunal, through any possible
means could not have, went on to hold that the
Performance Guarantee Test was successful.
The verboten attempt to do so, through
rewriting of the milestone conditions was rightly
set aside by the Division Bench of the High
Court through the observations in the
Impugned Judgment.
104. Hereafter, referencing the discriminatory claim
of SEPCO as to the need for waiver of notices
between the parties to the Amended EPC
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Agreements herein, it is evident that a plain
reading of the Section 34 of the 1996 Act
elaborates the grounds available to a party to
challenge an India-seated International
Commercial Arbitration. A reference to Section
34 Sub-Section 2 Clause (a) Sub-Clause (iii) of
the 1996 Act and specifically “unable to present
his case”, as rightly contended on behalf of
GMRKE Limited, also includes denial of natural
justice. This is also postulated in the 1996 Act
through the due process clause, being Section
18, which reads:

“ 18. Equal treatment of parties. –– The
parties shall be treated with equality and each
party shall be given a full opportunity to
present his case.”



105. When a party is unable to analyse, comment or
argue on a contention raised by the other party,
it will certainly be deemed as a breach of natural
justice and thereby, also a violation of the most
fundamental notions of justice. Henceforth, the
arbitral award is required to be set aside by the
courts under Section 18 and Section 34 Sub-
Section 2 Clause (a) Sub-Clause (iii) of the 1996
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Act. Such an observation derives its weight from
the examination by this Court in Ssangyong
Engineering (supra) , especially in its
paragraphs 34, 36, 37 and 46. Even the decision
Associate Builders (supra)
in , while dealing
with the head of “fundamental policy of Indian
law” recognizes audi alteram partem as a
fundamental juristic principle recognized under
Section 18 and Section 34 Sub-Section 2 Clause
(a) Sub-Clause (iii) of the 1996 Act.
106. Furthermore, reproving on the distinguished
treatment of the parties by the tribunal therein,
this Court in Narinder Singh and Sons v.
68
Union of India , observed that to be a violation
of the principles of natural justice and opined
the treatment to fall within the ambit of “lack of
full opportunity” under Section 18 of the 1996
Act. The award therein, preventing a just and
equitable decision, was set aside for being
juxtaposed to the Section 34 Sub-Section 2
Clause (a) Sub-Clause (ii) and (iii) of the 1996
Act.

68
(2022) 18 SCC 690
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107. The Arbitral Tribunal had gone on to apply the
aforesaid waiver discriminately between the
parties. For instance, the claims of GMRKE
Limited were rejected for want of contractual
notices despite those arising after March 2012,
as is evident from paragraphs 1400 to 1410 of
the Arbitral Award. This is after having observed
that claims by SEPCO, after unilateral
termination of the contract, would lie for being
a claim under common law, as reflected in
paragraph 239 of the Arbitral Award. Moreover,
post-termination claims for damages by GMRKE
Limited were rejected in paragraph 1348 of the
Arbitral Award. It further proceeded to award
two claims in favour SEPCO, which were prior
to March 2012, despite having opined them to
be non-maintainable. Reference may be made to
paragraphs 291, 373 to 375, 478 to 479 of the
Arbitral Award.
108. Even the Single Judge of the High Court failed
to correctly peruse and apply the law
provisioned through the 1996 Act, despite prima
facie nature of the discrimination of the Arbitral
Tribunal brought on record and pressed into
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service by GMRKE Limited. Moreover, the Single
Judge erred in observing that no plea for
discrimination was raised by GMRKE Limited
before the Arbitral Tribunal. No party could
have imagined the verbatim of an award to be
passed by a tribunal to raise the contention of
discrimination. This is despite the observations
in the Section 34 Judgment to the effect that
Single Judge reiterated the mandate to set aside
an award if it violates the principles of natural
justice or the jurisprudence of Section 18 of the
1996 Act.
109. The Division Bench did not, and rightly so, turn
a blind eye to such a glaring example of unequal
treatment. While reiterating the basic and
fundamental principles of the Indian legal
system and the provisions of the 1996 Act
accurately identified the failures of the Arbitral
Tribunal to apply the provisions of the 1996 Act,
as mandated through the very terms agreed by
the parties while curating their Arbitration
Agreement. It clearly fails the test of perversity
and is incomprehensible and not compatible
with the basic notions of justice in this country.
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110. Now, we shall move to opine on whether the
issue of suspension and cancellation of Unit 4
was determined correctly by the Arbitral
Tribunal?

111. On this, first and foremost, it is to be necessarily
iterated that this Arbitral Award is violative of
the very principles and notions of natural
justice altogether, beginning from the
discriminatory treatment of the parties as to
non-consideration of arguments by GMRKE
Limited or even assumption of specific
arguments that were not raised at all before the
Arbitral Tribunal. Such a circumstance does not
merit of warrant a severance of the said Arbitral
Award for any issue that was raised and
determined by the Arbitral Tribunal. Therefore,
we hold that since the Arbitral Award has failed
to stand the test while being placed in
juxtaposition to the grounds under Section 34
of the 1996 Act, it is a futile and merely
academic exercise to delve into the issue re:
suspension and cancellation of Unit 4 or any
other specific contention on merits for that
matter, as such a determination would,
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technically, amount to a modification of the part
of the decision of the Arbitral Award, which is
not permitted or contemplated as per the
statute and the 5-Judge Bench decision in
Gayatri Balasamy (supra)
. Therefore, we are
not inclined to examine the provisions of the law
as well as the Amended CWEETC Agreement to
opine on the merits of the instant issue.
112. Summarising the principles as aforesaid, it is
undoubtful that the interference under
jurisprudence laid down under Section 34 and
37 of the 1996 Act is narrow, while
aforementioned decisions do acknowledge that,
SEPCO has vehemently pushed so in an attempt
to persuade us to hold the Division Bench in
error. However, the jurisprudence, as also
identified in the aforesaid issues, clarifies that
the principles of natural justice, and the public
policy of India are paramount and cannot be
ignored or sidelined in an attempt not to
frustrate the patent or latent commercial
wisdom of the parties to seek an alternative
means of dispute resolution. Such issues attack
the root of the Indian legal system and the
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courts cannot be made a mere spectator to such
gross violations.
113. The scope under Section 37, as rightly argued
by SEPCO, is slimmer than that under Section
34, but, in the instant case, the Section 34
Judgment had failed to appreciate the gross
violations of the basic principles of adjudication
of a dispute. While one may argue some of those
may be latent and not a prima facie violation,
thereby not mandating any interference, direct
omission of the mandate of Section 18 and
Section 28 Sub-Section 3 of the 1996 Act are
clearly patent through a skimming of Arbitral
Award. No contentions appear on behalf of
SEPCO vis-à-vis waiver through the
circumstances arising in March 2012, and
despite such a want, the Arbitral Tribunal
exceeded the mandate to deem a waiver on the
part of GMRKE Limited for contractual notices,
without any explicit intent. Thereafter, it
patently discriminates against GMRKE Limited
to deny their claims for want of contractual
notice(s).
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114. An attack on the fundamental policy of Indian
law allows for reappreciation and thereby, the
Impugned Judgment cannot be faulted with on
the ground of having exceeded its jurisdiction
under Section 37 of the 1996 Act. The Division
Bench was correct in this regard, as to open up
the necessary floodgates of re-appreciation of
the Arbitral Award.
115. Having answered all the above issues, it is
apparent that the Arbitral Award is not good in
law, and it would be at the cost of reiterating the
above-stated examination by us to hold that the
Arbitral Award is not liable to be restored in the
concerning circumstances.
116. The Division Bench of the High Court, after
considering all the material placed on record
and particularly the relevant statutory
provisions and the law laid down on the issue
by this Court, has found the award to be one
which shocked the conscience of the court. The
Division Bench, after considering various
aspects, has held that the Arbitral Award was in
violation of the fundamental policy of the Indian
law, the principles of natural justice and most
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basic notions of justice thereby shocking the
conscience of the court. It is to be noted that
though it has specifically been assailed by the
GMRKE Limited before the Single Judge that the
Arbitral Tribunal had awarded certain claims in
favour of SEPCO, which were neither pleaded
nor argued by it and that the Arbitral Tribunal
had modified the contract between the parties
by holding in favour of SEPCO that there was a
due waiver of notice and though the waiver of
notice was held in favour of SEPCO the GMRKE
Limited was denied the same treatment and as
such, a discriminatory treatment was meted out
to it, and the said contention was rejected in a
cursory manner.
117. It is to be noted further that insofar as the
contention of the GMRKE Limited with regard to
the discriminatory treatment meted out to
SEPCO in respect of waiver of notice and as
such it being in violation of Section 18 of the
1996 Act is concerned, Single Judge held that
no such plea was raised before the Arbitral
Tribunal. To say the least, the said findings of
the Single Judge were perverse. It was only on
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passing of the Arbitral Award that the GMRKE
Limited would come to know about such a
discriminatory treatment being meted out to the
parties. The findings, as recorded, would require
a party to imagine in anticipation as to the
manner in which an arbitrator would pass an
award. Though the Single Judge of the High
Court recorded that an award is liable to be set
aside on the ground of it being in violation of
principles of natural justice or violation of
Section 18 of the 1996 Act, it, without dealing
with the contention of the GMRKE Limited
rejected the contention in that regard.
118. Moreover, the Single Judge, while answering the
contention on behalf of the GMRKE Limited with
regard to estoppel or waiver of notice, being in
violation of the Amended CWEETC Agreement,
is concerned, it observed that although the
material available may not be sufficient to come
to the said conclusion but that cannot be a
ground to interfere.
119. A perusal of the Arbitral Award, which has also
been considered in elaborate detail by the
Division Bench would reveal that the Arbitral
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Tribunal had meted out a discriminatory
treatment to SEPCO and GMRKE Limited. On
one hand, while SEPCO’s claims have been
granted despite its admitted failure to issue
contractual notices, the counter claims of
GMRKE Limited have been rejected on the
ground that it failed to serve equivalent notices.
The Division Bench correctly held that it cannot
turn a blind eye to such a glaring example of
unequal learned Division Bench also held that
such discrimination was violative of the equality
principle enshrined under Section 18 of the
1996 Act.
120. The Division Bench further found that the issue
before the Arbitral Tribunal was whether
SEPCO had successfully completed the
Performance Guarantee Test for Unit 1. It has
been found by the learned Division Bench that
the Arbitral Tribunal had come to a finding that
the Unit Characteristic Test for Unit 1 had
failed. The Division Bench found that the
successful completion of Unit Characteristic
Test was a pre-requisite for the successful
completion of Performance Guarantee Test. As
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such, it was found that if the Unit Characteristic
Test had failed, there was no question of the
Performance Guarantee Test having passed. It
was further found that a failure to successfully
complete the Reliability Run Test and Unit
Characteristic Test would mean that the
preconditions to perform the Performance
Guarantee Test had, in fact, not been achieved
and thus the question of conducting the same
would not arise. The Division Bench, therefore,
held that the Arbitral Tribunal had modified the
express terms of the agreements which was
contrary to the public policy of India.
121. It could, thus, be seen that the Division Bench
has come to a considerable conclusion that the
Arbitral Award passed by the Arbitral Tribunal
was in conflict with the public policy of India
inasmuch as the Arbitral Award was passed in
violation of the principles of natural justice. A
discriminatory treatment was meted out by the
Arbitral Tribunal to GMRKE Limited as against
SEPCO and that the Arbitral Award amounted
to modification of the contractual terms. We find
that the findings of the Division Bench are
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recorded after considering the entire material on
record and are in consonance with the law laid
down by the decisions of this Court in
Associate Builders (supra) , and Ssangyong
Engineering (supra)
. Therefore, we see no
reason to interfere with the well-reasoned
findings as recorded by the Division Bench.
122. Furthermore, placing the Arbitral Award in
juxtaposition to the scope of doctrine
Wednesbury Reasonableness no form of
reasonability would allow for such a
discrimination between the parties by an
Arbitral Tribunal.
123. We summarize the aforesaid findings as, despite
the limited scope of interference, the Division
Bench was obligated to have interfered with the
Arbitral Award owing to fulfilment of conditions
mandating a re-appreciation of the merits of the
award under Section 34 of the 1996 Act. Non-
interference and non-setting aside of the award
would have hampered upon the fundamental
policy of Indian law as well as the public policy
of India. The Arbitral Tribunal, itself being a
creature of the EPC Agreements, could not have
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travelled beyond its mandate to rewrite the
constitution of its own existence through
observing the condition of notice having been
waived. It further discriminated between the
parties, showcasing violation of the provisions
of the 1996 Act. As this Arbitral Award could not
have been severed owing to the aforesaid
reasons, thereby it is apt to set aside the whole
Arbitral Award.
124. Resultantly, the Impugned Judgment is upheld
and the Arbitral Award along with Section 34
Judgment are observed to have been rightly set
aside by the Division Bench of the High Court.
125. Consequently, being devoid of merits, the
instant Civil Appeal is dismissed.
126. There shall be no order as to costs.
127. Pending applications, if any, shall be disposed
of.

.…...……….……………………..CJI.
[ B. R. GAVAI ]


.……..………..……………………..J.
[ AUGUSTINE GEORGE MASIH ]
NEW DELHI;
SEPTEMBER 26, 2025.
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